BETHESDA MINING COMPANY

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 5,000 acres of land purchased 10 years ago for $4 million. Based on a recent appraisal, the company feels it could receive $6.5 million on an aftertax 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 $95 million. The equipment will be depreciated on a seven-year MACRS schedule. The contract runs for only four 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 in four years. 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 500,000 tons of coal per year at a price of $86 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 $77 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 of all the company’s strip mines. It is estimated the cost of reclamation will be $2.7 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation 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. Should Bethesda Mining take the contract and open the mine?

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 5,000 acres of land

purchased 10 years ago for $4 million. Based on a recent appraisal, the company feels it

could receive $6.5 million on an aftertax 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 $95 million. The equipment will be depreciated on a seven-year MACRS

schedule. The contract runs for only four 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 in four years. 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 500,000 tons of coal per year at a price of $86 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 $77 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 of all the company’s

strip mines. It is estimated the cost of reclamation will be $2.7 million. In order to get the

necessary permits for the strip mine, the company agreed to donate the land after reclamation

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. Should Bethesda Mining take the contract and open

the mine?

BETHESDA MINING COMPANY
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 5,000 acres of land purchased 10 years
ago for $5.4 million. Based on a recent appraisal, the company feels it could receive $7.3 million on an aftertax
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. As they are currently operating at full capacity, Bethesda will need to purchase additional equipment,
which will cost $49 million. The equipment will be depreciated on a seven-year MACRS schedule. The contract
only runs for four 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 500,000 tons of coal per year at a price of $70 per ton. Bethesda Mining
feels that coal production will be 750,000 tons, 810,000 tons, 830,000 tons, and 720,000 tons, respectively,
over the next four years. The excess production will be sold in the spot market at an average of $64 per ton,
Variable costs amount to $29 per ton and fi xed costs are $4.2 million 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 of all the company’s strip mines. It is estimated the
cost of reclamation will be $3.9 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 as a condition to receive the necessary mining permits. This
will occur in Year 5 and result in a charitable expense deduction of $7.3 million. Bethesda faces a 38 percent
tax rate and has a 12 percent required return on new strip mine projects. Assume 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, profi tablitity index, net present value, and internal rate of return for the new strip mine.
Should Bethesda Mining take the contract and open the mine?

BETHESDA MINING COMPANY

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 5,000 acres of land purchased 10 years ago for $4 million. Based on a recent appraisal, the company feels it could receive $6.5 million on an aftertax 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 $95 million. The equipment will be depreciated on a seven-year MACRS schedule. The contract runs for only four 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 in four years. However, Bethesda plans to open another strip mine at that time and will use the equipment at the new mine.

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The contract calls for the delivery of 500,000 tons of coal per year at a price of $86 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 $77 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 of all the company’s strip mines. It is estimated the cost of reclamation will be $2.7 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation 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.

QUESTION:

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. Should Bethesda Mining take the contract and open the mine?

Construct a Bayesian Network that functions as a Naïve Bayes Classifier. The naïve assumption lies on the fact that values of attributes are independent conditional on the decision variable. Keep this in mind while creating the network. The construction should include a graph (diagram of the network) and then the conditional probability distribution for the variables.

(Advanced Calculus and Real Analysis) - Cantor set, Lebesgue outer measure

* (a) Define the Cantor set.

(b) Show that the Cantor set P has the Lebesgue outer measure zero.

(c) Find the Lebesgue outer measure of the set L in the construction of the Cantor set.

Research different types of composite steel members and structures used throughout the construction industry. You should discuss composite steel-concrete slabs, beams and columns. Find and discuss industry case studies of the use of composite members and how they were beneficial to the structure.

• Assume that the proposed house is located in Scarborough and within a 100m distance from the coast. Note that the site classification is Class A’

Which of the joint types you recommend for this project and defend your choice. Refer to the project specification to know the masonry construction types recommended for this project

On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019.

Expenditures on the project were as follows:

On January 1, 2018, the company obtained a $4,900,000 construction loan with a 12% interest rate. The loan was outstanding all of 2018 and 2019. The company’s other interest-bearing debt included two long-term notes of $2,000,000 and $8,000,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2018 and 2019. Interest is paid annually on all debt. The company’s fiscal year-end is December 31.

Cleansea Ltd. needed to raise $150 million of additional capital to finance the design, development, and construction of its water desalination facility. Volta decided to issue bonds that pay interest of $2,250,000 on each of March 31 and September 30 and that will reach maturity on September 30, 2033. The bonds were issued at 94.4 on October 1, 2020, for $141.6 million, which represented a yield of 3.54%.

a. Has the company raised enough funds to start the development and construction of the water desalination facility? Explain why or why not.

b. Show the journal entry to record the issuance of the bonds.

c. Show the journal entries to record the first two interest payments. Ignore year-end accruals of -interest.

d. Assuming the company has a year end of December 31, what amount will be reported on the statement of financial position at December 31, 2020, related to these bonds?