Bethesda Mining is a mid-sized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip minds. 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 been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next 4 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 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 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 7-year MACRS schedule. The contract runs for only 4 years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60% of its initial purchase price in four years. 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% 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 minds. 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 25% tax rate and has a 12% 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 NPV, IRR for the new strip mine. Should Bethesda Mining take the contract and open the mine?
In: Finance
1. Sources of monopoly power
A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry—that is, other companies cannot enter the market to create competition in that particular industry.
Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario.
|
Scenario |
Barriers to Entry |
|||
|---|---|---|---|---|
|
Exclusive Ownership of a Key Resource |
Government-Created Monopolies |
Economies of Scale |
||
| The Aluminum Company of America (Alcoa) formerly controlled all U.S. sources of bauxite, a key component in the production of aluminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the U.S. aluminum industry from the late 19th century until the 1940s. | ||||
| In order to own and operate a taxi, drivers are required to obtain a taxi medallion. | ||||
| In the natural gas industry, low average total costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market. | ||||
Grade It Now
In: Economics
You are tasked with estimating the cost of capital for a firm. The risk-free rate is 3.2%, the expected rate of return on the market is 17.9%. Now, another similar company (similar unlevered cost of capital) has a debt-to-equity ratio of 1 to 5. It has a debt beta near zero and an equity market-beta of 1.1. Your own firm has more debt, for a debt-to-equity ratio of 1 to 1, with a debt beta of 0.5. What is a good estimate for your equity cost of capital?
In: Finance
1 Why do most project managers not recognize that they either need or can use the skills required to perform as an Imagineering project manager?
2 What is the fundamental difference between a ride and an attraction?
3 What are some of the differences between traditional brainstorming and Imagineering brainstorming?
4 How many project constraints are there on a traditional theme park attraction?
5 How would you prioritize the constraints?
6 Why is it necessary to consider cost before the Imagineering brainstorming sessions are completed?
In: Operations Management
Fill in the blanks.
Players,(....) , and payoffs are the defining characteristics of a game. At the Nash equilibrium of a game, everyone is playing a (....) .
A firms long-run supply curve is the portion of the [... ] cost that is above the marginal cost curve. The long-run competitive market equilibrium price must be such that all firms earn zero profit because [ ... ] .
If [.......] is greater than marginal cost the firm can increase profits by producing more output.
The following is an example of a source of monopoly power: [ ......] . The monopoly market output is inefficient due to [...] .
Amusement parks generally charge a lower price for admissions for children; this is an example of [.. ] price discrimination. If the amusement park could charge every individual their exact willingness to pay then this would be [ ...... ] price discrimination.
In: Economics
The purpose of this homework is to test your knowledge of GUI. Consider a fictional park where the entry price for 1 adult ticket is $50, and for 1 children ticket is $25. Write a simple GUI application that let user to enter the number of tickets and display the total price. The GUI should contain:
● One text field for the user to enter the number of adult tickets
● One text field for the user to enter the number of children tickets
● One button “Calculate total cost”
● One text field to display the total cost When the user clicks the button then the correct cost is displayed in the total price field. If the input text field is empty then it should be treated as 0 tickets.
In: Computer Science
What is the basic paradox or conflict found within the mission of the National Park Service?
In: Operations Management
Over view and identify economic concepts int he movie Hotel Rawanda.
In: Operations Management
What is derived demand? Give an example of derived demand for a hotel in your town.
In: Accounting
Discuss people/innovation perspective as one of the dimension of balanced scorecard in hotel context
In: Operations Management