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– ## Week4Assignment_Case2CapitalInvestmentDecisions-FINC600I001Summer2025-APEI.pdf **## Week4Assignment_Case2CapitalInvestmentDecisions-FINC600I001Summer2025-APEI.pdf** Hide Assignment Information Turnitin™ This assignment will be submitted to Turnitin™. Instructions Case 2 – Capital Investment D…
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– ## Week4Assignment_Case2CapitalInvestmentDecisions-FINC600I001Summer2025-APEI.pdf
**## Week4Assignment_Case2CapitalInvestmentDecisions-FINC600I001Summer2025-APEI.pdf**
Hide Assignment Information
Turnitin™
This assignment will be submitted to Turnitin™.
Instructions
Case 2 – Capital Investment
Decisions
[Chapter 8]
Bethesda Mining is a midsized coal mining company with 20 mines located in
Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep
mines as well as strip mines. 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 just 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 $5.4 million. Based on a recent appraisal, the company feels it could
receive $7.5 million on an aftertax 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. As they are currently operating at full capacity,
Bethesda will need to purchase additional equipment, which will cost $65 million.
The equipment will be depreciated on a seven-year MACRS schedule. The
contract only runs for four years. At that time, the coal from the site will be entirely
mined. The company feels that the equipment can be sold for 60 percent of its
initial purchase price. However, Bethesda plans to open another strip mine at that
time and will use the equipment at the new mine.
The contract calls for the delivery of 500,000 tons of coal per year at a price of $84
per ton. Bethesda Mining feels that coal production will be 750,000 tons, 810,000
tons, 830,000 tons, and 720,000 tons, respectively, over the next four years. The
excess production will be sold in the spot market at an average of $95 per ton.
Variable costs amount to $43 per ton and fixed costs are $5.2 million per year. The
mine will require a net working capital investment of 5 percent 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 mines. It is estimated the cost of reclamation will be $5.4
million. After the land is reclaimed, the company plans to donate the land to the
state for use as a public park and recreation area as a condition to receive the
necessary mining permits. This will occur in Year 5 and result in a charitable
expense deduction of $7.5 million. Bethesda has a 21 percent tax rate and a
required return of 12 percent on new strip mine projects. Assume a loss in any
year will result in a tax credit.
Assignment Directions
Write a case analysis of 1,000 – 1,250 words (4 to 5 pages), content (title
page and reference page not included) in proper APA format, covering the
following requirements:
You have been approached by the president of the company with a request to
analyze the project. Define, calculate, discuss, and use decision criteria to assess
the investment using the following methods:
1. Payback period.
2. Profitability index
3. Net present value
4. Internal rate of return
Based on your analysis, should Bethesda Mining take the contract and open the
mine? In your analysis, discuss the advantages and disadvantages of using each
method for capital investment decisions. Discuss any other capital investment
techniques that you would use to help you make a more informed decision. Are
there any other variables that they should consider in their decision?
Submission Guidelines
Prepare this Assignment according to the APA guidelines, including a title
page, an introduction, and a conclusion. An abstract is not required. Use in-
text citations and include a References section. A template is included in
the Resources and Supports.
In your report, make certain that you include at least three (3) credible
outside references from search engines or scholarly sources from the
APUS Online Library.
Note that your attached paper will automatically be submitted to Turnitin,
and an Originality Report should be sent back to the classroom within
around 15 minutes. The Originality report does not actually recommend
changes. It does point out where you may need to add a citation or
quotation marks (if not already cited). Once you use it a few times, you will
appreciate this tool, as it will assist you in improving quality and content, as
well as avoiding plagiarism. Your goal is to keep direct quotations to a
minimum and to make sure that you do not just cut and paste material.
Ensure that all your references are cited. Students should strive for a TII
report with a similarity index of less than 20%.
In the Assignment dropbox, please attach your paper as a file; do not copy
& paste. Submit your assignment by 11:59 pm ET, Day 7 (Sunday).
Your paper will be evaluated according to the Writing Assignment Grading
Rubric shown below. To maximize your grade, be sure to use the proper
organization (intro, body, conclusion) and follow APA style. Your paper should
Due on Aug 31, 2025 11:59 PM
have a title page and reference page, but you do not need an abstract for this
assignment. See the PowerPoint presentation attached for APA assistance.
This paper will be graded according to the FINC Graduate Grading Paper Rubric
Be sure to review the following before submitting your assignment:
Academic Integrity [content page]
Assignment Rubric: FINC Graduate Grading Paper Rubric [content page]
If you do not see the rubric, in the blue horizontal navigation bar
select Course Tools, then Assignments. Select the appropriate
assignment, and the rubric will be located near the bottom of the
page.
This Assignment aligns with the following:
Course Objective: 2 and 3 [content page]
Learning Objective: 2.1, 2.3, 3.1, 3.2, 3.3, 3.4, 3.5, and 3.6 [content page]
Resources and Supports
Student Paper Template [Word download]
Office 365 [webpage]: You have free access as an APUS student. Sign in
with your MyCampus Email credentials.
Submitting and Confirming a Submission : Watch this 3-minute video
if you need guidance on submitting your assignment.
[https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078757](https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078757)
[https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=dropbox&rcode=00D22884-7DC5-4408-809B-589E36B04C5A-900749](https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=dropbox&rcode=00D22884-7DC5-4408-809B-589E36B04C5A-900749)
[https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756](https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756)
[https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756](https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756)
[https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=coursefile&fileId=Student+Paper+Template+APA+7th+_002_.docx](https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=coursefile&fileId=Student+Paper+Template+APA+7th+_002_.docx)
[https://www.office.com/](https://www.office.com/)
[https://youtu.be/HY0ogyh-IhQ](https://youtu.be/HY0ogyh-IhQ)
[https://youtu.be/HY0ogyh-IhQ](https://youtu.be/HY0ogyh-IhQ)
**## Week4Assignment_Case2CapitalInvestmentDecisions-FINC600I001Summer2025-APEI.pdf**
Hide Assignment Information
Turnitin™
This assignment will be submitted to Turnitin™.
Instructions
Case 2 – Capital Investment
Decisions
[Chapter 8]
Bethesda Mining is a midsized coal mining company with 20 mines located in
Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep
mines as well as strip mines. 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 just 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 $5.4 million. Based on a recent appraisal, the company feels it could
receive $7.5 million on an aftertax 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. As they are currently operating at full capacity,
Bethesda will need to purchase additional equipment, which will cost $65 million.
The equipment will be depreciated on a seven-year MACRS schedule. The
contract only runs for four years. At that time, the coal from the site will be entirely
mined. The company feels that the equipment can be sold for 60 percent of its
initial purchase price. However, Bethesda plans to open another strip mine at that
time and will use the equipment at the new mine.
The contract calls for the delivery of 500,000 tons of coal per year at a price of $84
per ton. Bethesda Mining feels that coal production will be 750,000 tons, 810,000
tons, 830,000 tons, and 720,000 tons, respectively, over the next four years. The
excess production will be sold in the spot market at an average of $95 per ton.
Variable costs amount to $43 per ton and fixed costs are $5.2 million per year. The
mine will require a net working capital investment of 5 percent 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 mines. It is estimated the cost of reclamation will be $5.4
million. After the land is reclaimed, the company plans to donate the land to the
state for use as a public park and recreation area as a condition to receive the
necessary mining permits. This will occur in Year 5 and result in a charitable
expense deduction of $7.5 million. Bethesda has a 21 percent tax rate and a
required return of 12 percent on new strip mine projects. Assume a loss in any
year will result in a tax credit.
Assignment Directions
Write a case analysis of 1,000 – 1,250 words (4 to 5 pages), content (title
page and reference page not included) in proper APA format, covering the
following requirements:
You have been approached by the president of the company with a request to
analyze the project. Define, calculate, discuss, and use decision criteria to assess
the investment using the following methods:
1. Payback period.
2. Profitability index
3. Net present value
4. Internal rate of return
Based on your analysis, should Bethesda Mining take the contract and open the
mine? In your analysis, discuss the advantages and disadvantages of using each
method for capital investment decisions. Discuss any other capital investment
techniques that you would use to help you make a more informed decision. Are
there any other variables that they should consider in their decision?
Submission Guidelines
Prepare this Assignment according to the APA guidelines, including a title
page, an introduction, and a conclusion. An abstract is not required. Use in-
text citations and include a References section. A template is included in
the Resources and Supports.
In your report, make certain that you include at least three (3) credible
outside references from search engines or scholarly sources from the
APUS Online Library.
Note that your attached paper will automatically be submitted to Turnitin,
and an Originality Report should be sent back to the classroom within
around 15 minutes. The Originality report does not actually recommend
changes. It does point out where you may need to add a citation or
quotation marks (if not already cited). Once you use it a few times, you will
appreciate this tool, as it will assist you in improving quality and content, as
well as avoiding plagiarism. Your goal is to keep direct quotations to a
minimum and to make sure that you do not just cut and paste material.
Ensure that all your references are cited. Students should strive for a TII
report with a similarity index of less than 20%.
In the Assignment dropbox, please attach your paper as a file; do not copy
& paste. Submit your assignment by 11:59 pm ET, Day 7 (Sunday).
Your paper will be evaluated according to the Writing Assignment Grading
Rubric shown below. To maximize your grade, be sure to use the proper
organization (intro, body, conclusion) and follow APA style. Your paper should
Due on Aug 31, 2025 11:59 PM
have a title page and reference page, but you do not need an abstract for this
assignment. See the PowerPoint presentation attached for APA assistance.
This paper will be graded according to the FINC Graduate Grading Paper Rubric
Be sure to review the following before submitting your assignment:
Academic Integrity [content page]
Assignment Rubric: FINC Graduate Grading Paper Rubric [content page]
If you do not see the rubric, in the blue horizontal navigation bar
select Course Tools, then Assignments. Select the appropriate
assignment, and the rubric will be located near the bottom of the
page.
This Assignment aligns with the following:
Course Objective: 2 and 3 [content page]
Learning Objective: 2.1, 2.3, 3.1, 3.2, 3.3, 3.4, 3.5, and 3.6 [content page]
Resources and Supports
Student Paper Template [Word download]
Office 365 [webpage]: You have free access as an APUS student. Sign in
with your MyCampus Email credentials.
Submitting and Confirming a Submission : Watch this 3-minute video
if you need guidance on submitting your assignment.
[https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078757](https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078757)
[https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=dropbox&rcode=00D22884-7DC5-4408-809B-589E36B04C5A-900749](https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=dropbox&rcode=00D22884-7DC5-4408-809B-589E36B04C5A-900749)
[https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756](https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756)
[https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756](https://myclassroom.apus.edu/d2l/le/lessons/580823/topics/18078756)
[https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=coursefile&fileId=Student+Paper+Template+APA+7th+_002_.docx](https://myclassroom.apus.edu/d2l/common/dialogs/quickLink/quickLink.d2l?ou=679977&type=coursefile&fileId=Student+Paper+Template+APA+7th+_002_.docx)
[https://www.office.com/](https://www.office.com/)
[https://youtu.be/HY0ogyh-IhQ](https://youtu.be/HY0ogyh-IhQ)
[https://youtu.be/HY0ogyh-IhQ](https://youtu.be/HY0ogyh-IhQ)
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