Mini Case Study Bethesda Mining Company Order Instructions: For this paper the writer will make sure he include all calculations and tables in the appendix and reference them in the discussion by using numbers or letters base on APA rules for using tables and calculations in a paper.
I will urge the writer to carefully research the rules on how to use an appendix in a paper and also on how to include calculations in a paper using appendix. It is critical that the writer detail respond to all the questions mentioned in the mini case. the writer must clearly justify all calculations as mentioned hear below.
• Mini-Case Study: Bethesda Mining Company
In this case study, found on page 206 of your course text, you are asked to analyze the benefits and costs of a proposed project. After reading the case study:
Calculation of the financial figures as requested for the Mini Case Study Bethesda Mining Company
• Write up a brief recommendation as to the feasibility of the project ( 3 paragraphs with a minimum of 5 sentences a paragraph).
• Justify your recommendation using your calculations.
Write up a 2-page summary of your findings, including any calculations you might have made and relate how you reached your conclusion.
SAMPLE ANSWER
All the incremental cash flows of Bethesda Mining Company have to be used in analysis to ensure that the actual and the real tabulations are obtained. This is very crucial as net capital is build up through the use of a net working capital which occurs ahead of sales, and another reason is because the initial cash flow is depended on the cash outflow (Lappas, 2008). The company will be able to sale 600,000 tons each year on contract form and as well on the spot market. In order to get the total sales of the revenue, the price per ton that is under contract will have to be multiplied with 600,000tons and this will then be added to the spot market sales and finally multiplied with the spot market price. The sales of the Company will be as follows for a period of four years.
Year 1 year 2 Year 3 Year4
Contract $20,400,000 $20,400,000 $20,400,000 $20,400,000
Spot 2,000,000 5,000,000 8,400,000 5,600,000
________________________________________________________
Total $22,400,000 $25,400,000 $28,800,000 $26,000,000
The opportunity cost will be the after tax and the expected percentage required is the initial outlay for the networking for the required networking capital times. The year 1 working capital will be obtained as follows;
The Initial working Capital = .50 ($22,400,000) = $ 1,120,000
And this is the reason todays cash flow is given as follows:
Equipment -$30,000,000
Land -5,000,000
NWC -1,120,000
____________________
Total -$36,120,000
(The table showing tabulation for OCF can be found in the Appendix)
In the fifth year the Bethesda Mining Company has to incur $4 million in reclaiming the land that the company has to carry out its operations in. Taxes that will be incurred in the year are a credit to the company (Miller, Deitrick & Hu, 2011). Donation to the company is termed to be expenses that later result to a tax credit. Opportunity cost is availed for the land despite the fact that there is no information concerning the after-tax salvage value. Net working capital cash flow for each year is what is calculated below for it is very necessary in getting the NWC.
Year 1 Year 2 Year 3 Year 4
Beg. NWC $1,120,000 $1,270,000 $1,440,000 $1,300,000
End NWC 1,270,000 1,440,000 1,300,000 0
_____________________________________________________________________
NWC CF -$150,000 -$170,000 $140,000 &1,300,000
In accounting for the salvage value for the company cash flow is required to be tabulated whereby, the cost of equipment that is used is the after tax salvage value that will be used for the new project (Losiewicz, Oard & Kostoff, 2000). The equipment’s are termed as an opportunity cost as they can as well be sold and used after the project. To calculate the book keeping value for the equipment we release that the original cost will be tabulated by subtracting the original cost from the accumulated depreciation.
Therefore, book value of equipment will be given as = $30,000,000 – 4,290,000,- 7,350,000- 5,2502,000- 3,750,000
Thus, book value equipment will be = $9,360,000
The equipment cost $18million in the market in other words that is its market value and this will as mean that the selling of the equipment will bring more incurrence of taxes given as below;
The tax during selling of the equipment= ($18,000,000- 9,360,000)(3.8)=$3,283,200
It will mean that even after salvaging the equipment’s its value will be
=$18,000,000- 3, 283,200
=$14,716,800
This tabulating will give the net cash flow of each that the company will be incurring and it will include the operating cash flow of the company together with the after-tax salvage value and the net working capital for the company as well. The table below shows all the cash flows;
Time Cash-flow
- _$36,120,000
- 8,579,200
- 10,977,500
- 26,047,400
- -2,480,000
- -3,720,000
The tabulations given below will give the budgeting analysis for the project which will be obtained after the payback period;
The company payback period = 3+ ($8,579,900/$26,047,400
The payback period will be then be= 1.0563
The company will need the AAR and this is calculated by diving the average net income with the book value of Bethesda mining company (Han,Cheng, Dong & Yan, 2007). The mining operation is not beyond two year while the cash flows extend even after the period and this will give a better room for AAR to be tabulated as shown below.
AAR = ( ($4,439,200 = 3,797,500 = 6,522,400 = 6,280,600 – 2,480,000- 3,720,000) /6) /
(($25, 710,000 + 18,360, 000+ 13,110,000+ 9,360,000+0+0)/6)
Therefore the AAR will be .1487 0r14.87%
In order to get the IRR, its equation will be given as below;
0= -$36,120,000+ $8,579,200/ (1+IRR) +$10,977,500/ (1+IRR) 2 +$11,920,400/(1+IRR)3
While on the other side the IRRs for Bethesda project will be given as follows using a financial calculator;
IRR=14.41% – 61.75%
MIRR= 12.94%
NVP= -$36,120,000 +8,579,200/1.12 +$10,977,500/1.122 +$11,912,400/1.123
NVP= $2,031,914.04
Having obtained a positive NVP in the final calculations it’s enough evident that the project is worth and ought to be accepted for it will be positive at the end in terms of profit making.
Mini Case Study Bethesda Mining Company References
Han, J., Cheng, H., Dong, X., & Yan, X. (2007). Frequent pattern mining: Current status and future directions. Data Mining and Knowledge Discovery, 15(1), 55-86
Lappas, G. (2008). An overview of web mining in societal benefit areas. Online Information Review, 32(2), 179-195
Losiewicz, P., Oard, D. W., & Kostoff, R. N. (2000). Textual data mining to support science and technology management. Journal of Intelligent Information Systems, 15(2), 99. Retrieved from http://search.proquest.com/docview/200192572?accountid=45049
Miller, Z., Deitrick, W., & Hu, W. (2011). Anomalous network packet detection using data stream mining. Journal of Information Security, 2(4), 158-168. Retrieved from http://search.proquest.com/docview/929269873?accountid=45049
Appendix
The tabulation of the OCF on yearly basis is given as;
| Year1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
| Sales | $22,400,000 | $25,400,000 | $28,800,000 | $26,000,000 | ||
| Var. Costs | 8,450,000 | 9,425,000 | 10,530,000 | 9,620,000 | ||
| Fixed Costs | 2,500,000 | 2,500,000 | 2,500,000 | 2,500,000 | $4,000,000 | $6,000,000 |
| Dep. | 4,290,000 | 7,350,000 | 5,250,000 | 3,750,000 | ||
| EBT | $7,160,000 | $6,125,000 | $10,520,000 | $10,130,000 | -$4,000,000 | -$6,000,000 |
| Tax | 2,720,800 | 2,327,500 | 3,997,600 | 3,849,400 | -$1,520,000 | -2,280,000 |
| Net Income | $4,439,200 | $3,797,500 | $6,522,400 | $6,280,000 | -$2,480,000 | -$3,720,000 |
| +Dep. | 4,290,000 | 7,350,000 | 5,250,000 | 3,750,000 | ||
| OCF | $8,729,200 | $11,147,500 | $11,772,400 | $10,030,600 | -$2,480,000 | -$3,720,000 |
