Financial Management: Bethesda Mining Company Case Study
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Bethesda Mining is a midsized coal mining company considering opening a strip mine in Ohio. The company has 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 $6 million. Calculate the payback period, profitability index, net present value, internal rate of return, and modified internal rate of return for the new strip mine. Do a sensitivity analysis based on change in fixed costs.