case study bethesda mining company solution

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To evaluate this task, we should determine the small cash flows created from job. Because net working capital is developed before sales, the preliminary capital relies halfway on this money outflow. So, we will start by computing sales. Every year, the company will offer 500,000 lots responsible, et cetera out on a limb market. The overall sales profits is the rate per lot responsible times 500,000 heaps, plus the area market sales times the area market value.

bethesda mining company case solution case solution and analysis, hbr case study solution & analysis of harvard case studies

To examine this task, we need to determine the small cash flows created with task. Given that net working capital is developed in advance of sales, the preliminary capital bases halfway on this money outflow. So, we will start by computing sales. Yearly, the company will offer 500,000 lots responsible, et cetera right away market. The overall sales income is the rate per heap responsible times 500,000 heaps, plus the area market sales times the area market value.

bethesda mining company mini case free essays

Mini-Case Study: Bethesda Mining Company Week 4 Application 2 Jo-Ann Savoie Walden University Finance: Fiscal Leadership in a Global Environment DDBA-8140-2 Dr. Guerman Kornilov March 24, 2011 The following Mini-Case on Bethesda Mining Company was taken from the text corporate finance (2010, P. 203-204). In order to determine if Bethesda Mine should open, a thorough analysis of the payback period, profitability index, average accounting...

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Bethesda Mining Company 02/24/2011 Introduction Bethesda Mining is a midsized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. Recently the coal mining industry has been impacted by environmental regulations that have presented challenges for the industry. However, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda is considering operating a new strip...

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CHAPTER 7, Case #1 BETHESDA MINING To analyze this project, we must calculate the incremental cash flows generated by the project. Since net working capital is built up ahead of sales, the initial cash flow depends in part on this cash outflow. So, we will begin by calculating sales. Each year, the company will sell 600,000 tons under contract, and the rest on the spot market. The total sales revenue is the price per ton under contract times 600,000 tons, plus the spot market sales times the...

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Case: Bethesda Mining (Chapter 6) I have been asked by the President of Bethesda Mining Company to analyze a proposition by Mid-Ohio Electric Company to supply coal for its electric generators for the next four years. This proposition involves opening a new mine in Ohio, and making an investment in new equipment of $85,000,000, with a residual value to be transferred to a subsequent location of 60% of the purchase price, or $51,000,000. The equipment will be depreciated according to a 7-year MARCS...

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CHAPTER 6, Case #1 BETHESDA MINING To analyze this project, we must calculate the incremental cash flows generated by the project. Since net working capital is built up ahead of sales, the initial cash flow depends in part on this cash outflow. So, we will begin by calculating sales. Each year, the company will sell 500,000 tons under contract, and the rest on the spot market. The total sales revenue is the price per ton under contract times 500,000 tons, plus the spot market sales times the...

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Mini Case Study-Bethesda Mining Mini-Case Study: Bethesda Mining Company Week 4 Application 2 Jo-Ann Savoie Walden University Finance: Fiscal Leadership in a Global Environment DDBA-8140-2 Dr. Guerman Kornilov March 24, 2011 The following Mini-Case on Bethesda Mining Company was taken from the text corporate finance (2010, P. 203-204). In order to determine if Bethesda Mine should open, a thorough analysis of the payback period, profitability...

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Bethesda Mining Company To be able to analyze the project, we need to calculate the projects NPV, IRR, MIRR, Payback Period, and Profitability Index. Since net working capital is built up ahead of sales, the initial cash flow depends in part on this cash outflow. So, we will begin by calculating sales. Each year, the company will sell 600,000 tons under contract, and the rest on the spot market. The total sales revenue is the price per ton under contract times 600,000 tons, plus the spot market...

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Bethesda Mining In order to decide whether our company should undertake the project, we should refer to the projects NPV and IRR. NPV indicates the possible profit (net cash flow) which the project will yield in future, a positive NPV suggests that company can earn profit from the investment and vice versa. IRR is the discounted rate which makes the NPV of all cash flows equal to zero, the greater the amount it exceeds the cost of capital (required rate of return), the higher the net cash flow...

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3. DATA MINING TECHNIQUES 3.1 NECESSITY OF DATA MINIING DATA Data is numbers or text which is a statement of a fact. It is unprocessed and stored in database for further analysis. Operational and transaction data such as cost and sales, is essential to modern enterprise's internal environment. Non-operational data such as competitors' sales and forecasting data, is responsible for analysis of external environment. INFORMATION Information is generated through data mining so that it becomes...

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Mini Cases in Movement Disorders Mona Dalzon Case 1 Kenny Kenny is a teenager who has experienced uncontrollable bodily and facial movements, various uncontrolled vocalizations, and other compulsions such as excessive hand washing and wringing. He has been treated with Clonidine, Haldol, pimozide and buspirone. This patient was diagnosed with Tourettes Syndrome. Clonidine is a vasodilator that allows for blood to flow more easily to the brain. This lowers blood pressure and helps treat the tics...

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solved case solution: bethesda mining company case solution

Bethesda Mining Company Case Solution Case Study Analysis Solutions This case is about Business To evaluate this task, we should determine the small cash flows created from job. Because net working capital is developed before sales, the preliminary capital relies halfway on this money outflow. So, we will start by computing sales. Every year, the company will offer 500,000 lots responsible, et cetera out on a limb market. The overall sales profits is the rate per lot responsible times 500,000 heaps, plus the area market sales times the area market value.

case study: bethesda mining company

CASE STUDY Bethesda Mining Company Bethesda Mining is a midsized coal mining with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip mines. Most of the coal mined is sold under contract, with excess production sold on the spot market. The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improve market demand for high-sulfur coal. Bethesda has just been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next twenty years. Bethesda mining does not have enough excess capacity for its existing mines to guarantee the contract. The company is considering opening a strip mine in Ohio on 5,000 acres of land purchased 10 years ago for $9 million. Based on a recent appraisal, the company feels it could receive $7 million on an after tax basis if it sold the land today. Strip mining is a process where the layers of top soil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would simply remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, Bethesda will need to purchase additional necessary equipment, which will cost $37 million. The equipment will be depreciated on a twenty-year MACRS schedule. The contract runs for twenty years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60 percent of its initial purchase price. However, Bethesda plans to open another strip mine at that time and will use the equipment at the new mine. The contract calls for the delivery of 600,000 tons of coal per year at a price of $32 per ton for the first year. Bethesda Mining feels that coal production will be 650,000 ton, 725,000 ton, 810,000 tons, and 740,000 tons, respectively, over the next four years. After that coal production is expected to increase at a rate of 3 percent until Year 20. The excess production will be sold in the spot market at an average of $40 per ton for the first year. Variable cost amount to $13 per ton, and fixed costs are $2,500,000 for the first year. All prices and costs increase at the annual inflation rate of 3 percent. The mine will require a net working capital investment of 6 percent of sales. The NWC will be built up in the next year prior to the sales. Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in year 21. The company uses an outside company for reclamation of all the companys strip mines. It is estimated the cost of reclamation will be $3.5 million. After the land is reclaimed, the company plans to donate the land to the state for use as a public park and recreation area. This will occur in year 22 and result in a charitable expense deduction of $6 million. Bethesda faces a 35 percent tax rate. The real cost of risk free debt is 3 percent. The firms unlevered real cost of equity capital is 8 percent. The firms capital structure is 60 percent equity and 40 percent debt. Assume that a loss in any year will result in tax credit. You have been approved by the president of the company with a request to analyze the project. 1. Estimate the project cash flows. Calculate the payback period, profitability index, average accounting return, net present value, internal rate of return, and modified internal rate of return for the new strip mine. Should Bethesda Mining take the contract and open the mine? 3. Perform a sensitivity analysis on NPV by changing the key variables. Comment on how NPV changes as you increase the value of each variable. 4. Perform a scenario analysis on NPV. 2.

bethesda mining company case

Bethesda Mining is a midsized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip mines. Most of the coal mined is sold under contract, with excess production sold on the spot market.

The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda has just been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next four years. Bethesda Mining does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in Ohio on 5000 acres of land purchased 10 years ago for $5 million. Based on a recent appraisal, the company feels it could receive $5.5 million on an after-tax basis if it sold the land today.

Strip mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would simply remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, Bethesda will need to purchase additional necessary equipment, which will cost $85 million. The equipment will be depreciated on a seven-year MACRS schedule. The contract runs for only four years. At the time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60 percent of its initial purchase price. However, Bethesda plans to open another strip mine at that time and will use the equipment at the new mine.

The contract calls for delivery of 500,000 tons of coal per year at a price of $82 per ton. Bethesda Mining feels that coal production will be 620,000 tons, 680,000 tons, 730,000 tons, and 590,000 tons, respectively, over the next four years. The excess production will be sold in the spot market at an average of $76 per ton. Variable costs amount to $31 per ton, and fixed costs are $4,100,000 per year. The mine will require a net working capital investment of 5 percent of sales. The NWC will be built up in the year prior to the sales.

Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in year 5.The company uses an outside company for reclamation will be $2.7 million. After the land is reclaimed, the company plans to donate the land to the state for use as a public park and recreation area. This will occur in year 6 and result in a charitable expense deduction of $6 million. Bethesda faces a 38 percent tax rate and has a 12 percent required return on new strip mine projects. Assume that a loss in any year will result in a tax credit.

You have been approached by the president of the company with a request to analyze the project. Calculate the payback period, profitability index, net present value, and internal rate of return for the new strip mine.