Chapter 6

Bethesda Mining
Input area:
Equipment
Land cost
Aftertax land value
Contract sales/tons
Year 1 production
Year 2 production
Year 3 production
Year 4 production
Contract $/ton
Spot market $/ton
Variable cost/ton
Year 1 depreciation
Year 2 depreciation
Year 3 depreciation
Year 4 depreciation
Fixed costs
Reclamation costs
Charitable expense
NWC percent
Tax rate
Required return

$
$
$

85,000,000
6,000,000
7,000,000
500,000
620,000
680,000
730,000
590,000
$95
$90
$31
14.30%
24.50%
17.50%
12.50%
$4,300,000
$2,800,000
$7,500,000
5%
38%
12%

(85,000,000)
(7,000,000)
(2,915,000)
($94,915,000)

Output area:

Time 0 cash flow

Equipment
Land
NWC
Total
Sales
Contract
Spot
Total

$
$

Year 1
47,500,000 $
10,800,000
58,300,000 $

Year 2
47,500,000
16,200,000
63,700,000

Sales
VC
FC
Dep
EBT
Tax
NI
+ Dep
OCF

63,700,000
21,080,000
4,300,000
20,825,000
17,495,000
6,648,100
10,846,900
20,825,000
31,671,900

Beginning NWC
Ending NWC
NWC cash flow

$
$

2,915,000 $
3,185,000
(270,000) $

3,185,000
3,410,000
(225,000)

Total cash flow

25,912,500 $

31,446,900

Book value

72,845,000 $

52,020,000

51,000,000
26,520,000
(9,302,400)
41,697,600

Salvage

$
$
$

58,300,000
19,220,000
4,300,000
12,155,000
22,625,000
8,597,500
14,027,500
12,155,000
26,182,500

MV
BV
Taxes

Salvage CF

$
$

$
Time
0
1
2
3
4
5
6

Profitability index
Average accounting return
IRR
IRR
MIRR
NPV

Cash flow
(94,915,000)
25,912,500
31,446,900
31,869,900
68,981,300
(1,736,000)
(4,650,000)
1.1736
20.79%
19.01%
-74.64%
14.93%
16,472,777.67

$
$

Year 3
47,500,000 $
20,700,000
68,200,000 $

Year 4
47,500,000
8,100,000
55,600,000

Year 5

Year 6

$
$
$
$

68,200,000
22,630,000
4,300,000
14,875,000
26,395,000
10,030,100
16,364,900
14,875,000
31,239,900

$
$
$

55,600,000
18,290,000
4,300,000
10,625,000
22,385,000
8,506,300
13,878,700
10,625,000
24,503,700

2,800,000 $

7,500,000

(2,800,000) $
(1,064,000)
(1,736,000) $
(1,736,000) $

(7,500,000)
(2,850,000)
(4,650,000)
(4,650,000)

$
$

2,780,000

3,410,000 $
2,780,000
630,000 $

31,869,900 $

27,283,700

37,145,000 $

26,520,000 $

2,780,000

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