Question: BETHESDA MINING COMPANY Bethesda Mining is a midsizedcoal mining company with 20 mines located i... BETHESDA MININGCOMPANY Bethesda Mining is a midsized coal mining company with 20mines located in Ohio, Pennsylvania, West Virginia, and Kentucky.The company operates deep mines as well as strip mines. Most of thecoal mined is sold under contract, with excess production sold onthe spot market. The coal mining industry, especially high-sulfurcoal operations such as Bethesda, has been hard-hit byenvironmental regulations. Recently, however, a combination ofincreased demand for coal and new pollution reduction technologieshas led to an improved market demand for high-sulfur coal. Bethesdahas just been approached by Mid-Ohio Electric Company with arequest to supply coal for its electric generators for the nextfour years. Bethesda Mining does not have enough excess capacity atits existing mines to guarantee the contract. The company isconsidering opening a strip mine in Ohio on 5,000 acres of landpurchased 10 years ago for $5 million. Based on a recent appraisal,the company feels it could receive $5.5 million on an aftertaxbasis if it sold the land today. Strip mining is a process wherethe layers of topsoil above a coal vein are removed and the exposedcoal is removed. Some time ago, the company would simply remove thecoal and leave the land in an unusable condition. Changes in miningregulations now force a company to reclaim the land; that is, whenthe mining is completed, the land must be restored to near itsoriginal condition. The land can then be used for other purposes.Because it is currently operating at full capacity, Bethesda willneed to purchase additional necessary equipment, which will cost$85 million. The equipment will be depreciated on a seven-yearMACRS schedule. The contract runs for only four years. At that timethe coal from the site will be entirely mined. The company feelsthat the equipment can be sold for 60 percent of its initialpurchase price in four years. However, Bethesda plans to openanother strip mine at that time and will use the equipment at thenew mine. The contract calls for the delivery of 500,000 tons ofcoal per year at a price of $82 per ton. Bethesda Mining feels thatcoal production will be 620,000 tons, 680,000 tons, 730,000 tons,and 590,000 tons, respectively, over the next four years. Theexcess production will be sold in the spot market at an average of$76 per ton. Variable costs amount to $31 per ton, and fixed costsare $4,100,000 per year. The mine will require a net workingcapital investment of 5 percent of sales. The NWC will be built upin the year prior to the sales. Bethesda will be responsible forreclaiming the land at termination of the mining. This will occurin Year 5. The company uses an outside company for reclamation ofall the company's strip mines. It is estimated the cost ofreclamation will be $2.7 million. In order to get the necessarypermits for the strip mine, the company agreed to donate the landafter reclamation to the state for use as a public park andrecreation area. This will occur in Year 6 and result in acharitable expense deduction of $6 million. Bethesda faces a 38percent tax rate and has a 12 percent required return on new stripmine projects. Assume that a loss in any year will result in a taxcredit. You have been approached by the president of the companywith a request to analyze the project. Calculate the paybackperiod, profitability index, net present value, and internal rateof return for the new strip mine. Should Bethesda Mining take thecontract and open the mine? no need for excel i need calculationsand show your work please