Bethesda Mining Company

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| Bethesda Mining Company Case Study | Financial Analysis | | Section 2, Team 3: Alicha Brown, Michael Simon, Lisa Young | 3/7/2014 | | Financial Management 526 – Team Project 1 Instructor – Andy Boettcher Professor – John Nofsinger Financial Management 526 – Team Project 1 Instructor – Andy Boettcher Professor – John Nofsinger The Bethesda Mining Company has been offered a contract to ramp up its production. This new contract would run for a period of four (4) years and would entail the delivery of 2,000,000 tons of coal. At first blush it seems like a favorable undertaking, in that the company currently owns a 5000-acre plot of land ideal for the mine. It also estimates production in excess of the contract, allowing for additional sales in the spot market. The downsides are that Bethesda is currently operating at maximal capacity and would incur the costs of supplying all new equipment along with a host of both fixed and variable costs. Bethesda Mining is an environmentally conscious organization and will absorb the costs of reclaiming the land following the four-year project and will then donate the land to the state for recreational use. The following is the requested financial analysis of said project. In order to make a reliable recommendation, we will calculate and consider the payback period, profitability index, average accounting return, net present value, internal rate of return, and modified rate of return for the new strip mine. Although Bethesda will only be mining for a four (4) year period, our cash flow analysis will start at Year 0 and run through Year six (6). The land reclamation will take place in year five (5) and the land donation in year six (6). We begin by examining our proposed operating cash flows. Based on the contract and the spot market, the following are our projected sales income: | Year 1

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