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    Mini Case: Bethesda Mining Company: Disusun Oleh

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    rica
    The document presents financial data and calculations for evaluating a proposed mining project by Bethesda Mining Company. It provides details on investment costs, operating cash flows over 4 years, salvage value, tax rates, and required returns. Calculations show the project has a positive NPV of $20 million and IRR of 20.23%, above the required 12% return. The payback period is 3.08 years, less than the 4-year project life. Therefore, the summary concludes that Bethesda should undertake the project as it is expected to be profitable.

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    Mini Case: Bethesda Mining Company: Disusun Oleh

    Uploaded by

    rica
    294 views5 pages
    The document presents financial data and calculations for evaluating a proposed mining project by Bethesda Mining Company. It provides details on investment costs, operating cash flows over 4 years, salvage value, tax rates, and required returns. Calculations show the project has a positive NPV of $20 million and IRR of 20.23%, above the required 12% return. The payback period is 3.08 years, less than the 4-year project life. Therefore, the summary concludes that Bethesda should undertake the project as it is expected to be profitable.

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    Original Title

    KUIS 6 RICA RAHAYU 21919024 MANKEU

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    The document presents financial data and calculations for evaluating a proposed mining project by Bethesda Mining Company. It provides details on investment costs, operating cash flows over 4 years, salvage value, tax rates, and required returns. Calculations show the project has a positive NPV of $20 million and IRR of 20.23%, above the required 12% return. The payback period is 3.08 years, less than the 4-year project life. Therefore, the summary concludes that Bethesda should undertake the project as it is expected to be profitable.

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    © All Rights Reserved
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    294 views5 pages

    Mini Case: Bethesda Mining Company: Disusun Oleh

    Uploaded by

    rica
    The document presents financial data and calculations for evaluating a proposed mining project by Bethesda Mining Company. It provides details on investment costs, operating cash flows over 4 years, salvage value, tax rates, and required returns. Calculations show the project has a positive NPV of $20 million and IRR of 20.23%, above the required 12% return. The payback period is 3.08 years, less than the 4-year project life. Therefore, the summary concludes that Bethesda should undertake the project as it is expected to be profitable.

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    of 5

    MINI CASE : BETHESDA MINING COMPANY

    disusun oleh :

    Rica Rahayu

    NIM :

    21919024

    JURUSAN MAGISTER AKUNTANSI

    FAKULTAS BISNIS DAN EKONOMIKA

    UNIVERSITAS ISLAM INDONESIA

    2021
    Part 1. Input Data (in thousands of dollars)
    Project life 4
    Opportunity Cost (after tax) -$7,000,000
    Equipment Investment $85,000,000
    Contract calls for (tons of coal/year) 500,000
    Sales price per ton (per contract) $95
    Sales price per ton (excess of contract) $90
    Variable costs (per ton) -$31
    Fixed cost (per year) -$4,300,000
    NWC/sales (starting yr 0) 5%
    Cost of reclamation of land (yr 5) -$2,800,000
    Charitable deduction (yr 6) $7,500,000
    Tax rate 38%
    Required Return 12%
    Depreciated on 7 year MACRS
    Market Value at yr 4 (but not
    selling) 60%

    Part 2 Sales Revenue

    Production Revenue per Revenue Total


    Year (tons) contract (excess) Revenue
    1 620,000 $47,500,000 $10,800,000 $58,300,000
    2 680,000 $47,500,000 $16,200,000 $63,700,000
    3 730,000 $47,500,000 $20,700,000 $68,200,000
    4 590,000 $47,500,000 $8,100,000 $55,600,000

    Part 3 depreciation and amortization schedule

        Years Accum'd
    Initial
    Year Cost 1 2 3 4 Depr'n

    Equipment
    Depr'n Rate 14.29% 24.49% 17.49% 12.49%
    Equipment
    Depreciatio
    n Dollars 85,000,000 $12,146,500 $20,816,500 $14,866,500 $10,616,500 $58,446,000
    Ending
    Book Val:
    Cost –
    Accum
    Depreciatio
    n   72,853,500 52,037,000 37,170,500 $26,554,000 26,554,000

    Part 4 net salvage values, dalam 4 tahun


    Equipment
    Estimated Sales Price in Year 4 $51,000,000
    Book Value in Year 4 26,554,000
    Expected Gain or Loss 24,446,000
    Taxes paid or tax credit -9,289,480
    Net cash flow from salvage $41,710,520.00
    Part 5 . Project net cash flows (time line of annual cash flows)

    Years 0 1 2 3 4 5 6
    Investment
    Outlays at
    Time Zero:

    Equipment ($85,000,000)
    Opportunity
    Costs (7,000,000)

    Operating Cash
    Flows over the
    Project's Life:

    Sales revenue $58,300,000 $63,700,000 $68,200,000 $55,600,000 0 0


    Operating
    Costs (23,520,000) (25,380,000) (26,930,000) (22,590,000) (2,800,000) 0
    Depreciation
    (equipment) (12,146,500) (20,816,500) (14,866,500) (10,616,500) 0 0
    Oper. income
    before taxes
    (EBIT) $22,633,500 $17,503,500 $26,403,500 $22,393,500 (2,800,000) 0
    Taxes on
    operating
    income (38%) (8,600,730) (6,651,330) (10,033,330) (8,509,530) 1,064,000 2,850,000
    After-tax
    operating
    income $14,032,770 $10,852,170 $16,370,170 $13,883,970 (1,736,000) 2,850,000
    Add back
    depreciation 12,146,500 20,816,500 14,866,500 10,616,500 0 0

    Operating cash
    flow $26,179,270 $31,668,670 $31,236,670 $24,500,470 (1,736,000) 2,850,000
    Terminal
    Year Cash
    Flows:
    Required level
    of net working
    capital ($2,915,000) ($3,185,000) ($3,410,000) ($2,780,000) $0 $0 0
    Required
    investment in
    NWC ($2,915,000) ($270,000) ($225,000) $630,000 $2,780,000 $0 0

    Terminal
    Year Cash
    Flows:
    Net salvage
    value $41,710,520

             
    Net Cash Flow (Time
    line of cash flows) ($94,915,000) $25,909,270 $31,443,670 $31,866,670 $68,990,990 ($1,736,000) 2,850,000

    Part 6. Data for payback years


    0 1 2 3 4 5 6
    Net cash flow (94,915,000) 25,909,270 31,443,670 31,866,670 68,990,990 (1,736,000) 2,850,000
    Cumulative Cash Flow (94,915,000) (69,005,730) (37,562,060) (5,695,390)
    Part of year required for
    payback 1.00 1.00 1.00 0.08

    Part 7. Data for profitability index


    0 1 2 3 4 5 6
    Net Cash Flow (94,915,000) 25,909,270 31,443,670 31,866,670 68,990,990 (1,736,000) 2,850,000
    22,682,066.2 (985,053.02
    Present Value (94,915,000) 23,133,276.79 25,066,701.21 7 43,845,021.39 ) 1,443,898.7
    Part 8 Key Output : Appraisal of the proposed project

    Net Present Value (at 12%) $20,270,911.33


    IRR 20.23%
    MIRR 15.64%
    Payback Period 3.08
    Profitability Index 1.21

    Apakah Bethesda harus mengambil project ini ?


    Berdasarkan perhitungan di atas menurut saya Bethesda harus mengambil project ini karena;

     NPV positif. Yang menandakan bahwa project tersebut menguntungkan.


     IRR 20% lebih tinggi dari pada imbal hasil yang diharapkan yaitu 12%, sehingga
    project menguntungkan
     MIRR 15,64% lebih tinggi dari imbal hasil yang diharapkan yaitu 12% sehingga
    project menguntungkan untuk diambil
     Payback period 3, 08, lama waktu untuk Mengembalikan investasi awal selama 3,08
    tahun. Lebih cepat dari masa project
     Profitability index 1,21 lebih dari 1 sehingga project bisa diambil

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