# Essay on Mini Case Study-Bethesda Mining

1321 Words Jul 13th, 2011 6 Pages
Mini-Case Study: Bethesda Mining Company Week 4 Application 2
Jo-Ann Savoie
Walden University
Finance: Fiscal Leadership in a Global Environment
DDBA-8140-2
Dr. Guerman Kornilov
March 24, 2011 The following Mini-Case on Bethesda Mining Company was taken from the text corporate finance (2010, P. 203-204). In order to determine if Bethesda Mine should open, a thorough analysis of the payback period, profitability index, average accounting return, net present value, internal rate of return, and the modified internal rate of return have been conducted.
Table 1. Cash flow on Investment
Tax rate= 38% Year 0 Cash flow (outflow) on investment Opportunity cost of using
The profitability index = PV of cash inflows/investment = \$115,067,705/\$94,915,000 = 1.21%
In order to determine the IRR and MIRR Excel IRR and MIRR functions were used. A result of 20% was calculated for the IRR and 15.65% was calculated for the MIRR.
Table 10. IRR calculations
Cash flow

(\$94,915,000)
\$25,909,270
\$31,443,670
\$31,866,670
\$67,254,990
\$0
\$2,850,000
20.00%

Table 11 MIRR calculations
Cash flow

(\$94,915,000)
\$25,909,270
\$31,443,670
\$31,866,670
\$67,254,990
\$0
\$2,850,000
15.65%

2. Should the project be undertaken? After all calculations have been completed I would support the project. The NPV is positive, and the IRR and MIRR are higher than the required rate of return of 12%. The payback period is less than four years and the profitability index is higher than 1.

References
Ross, S. A., Westerfield, R. W., & Jaffe, J. (2008). Corporate finance (8th ed.). New York: McGraw-Hill Irwin.

## Related Documents

• ###### One Significant Change That Has Occurred in the World Between 1900 and 2005. Explain the Impact This Change Has Made on Our Lives and Why It Is an Important Change.

2000 (the collapse of the Soviet Union, the reunification of Germany, the surge of globalization from the mid-1990s) and afterward (9/11, or the global recession of 2008) when one could quite plausibly argue that a new era had begun. A compelling case can be made for viewing the decades of the global scramble for colonies after 1870 as a predictable culmination of the long nineteenth century, which was ushered in by the industrial and political revolutions of the late 1700s. But at the same time…

Words: 163880 - Pages: 656
• ###### Business Ethics and Decision-Making for Personal Integrity Social Responsibility-Libre

and values. Distinguish legal responsibilities from ethical responsibilities. Explain why ethical responsibilities go beyond legal compliance. Distinguish ethical decision making from other practical decision situations. Introduction: Making the Case for Business Ethics From the time Enron Corporation collapsed in 2001, business ethics has seldom strayed from the front pages of the press. The list of corporations and business leaders that have been involved with legal and ethical wrongdoing is…

Words: 256568 - Pages: 1027
• ###### Strategic Management Essays

THIRTEENTH EDITION Strategic Management CONCEPTS AND CASES Fred R. David Francis Marion University Florence, South Carolina Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Strategic Management CONCEPTS AND CASES Editorial Director: Sally Yagan Editor in Chief: Eric Svendsen Acquisitions Editor: Kim Norbuta…

Words: 296977 - Pages: 1188