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 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 enivornmentsl regulation. Recently,however,a combination of demand for coal and new pollution reduction technology has led to an improved market demand for high sulfur coal. Bethesda has just been approached by Mid Ohio Elecric 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 contact. The company is considering opening a strip mine in Ohio on 5000 acres of land purchased 10 years ago for $5.4million Based on a recent appraisal ,the company feels it would $7.3 million on after tax basis if it sold the land today. Strip mining is a process where the layers of topsoil have a coal vein are removed and the exposed coal is removed. Sometime ago,the company would simply remove the coal and leave the land in an usual 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 used fof other purposes. As they are currently operating at full capacity,Bethesda will need to purchase additional equipment,which will cost $49 million.The equipment will be depreciated on a seven years 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 can be sold for 60 percent of its intial 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 delivery of 500000 tons of coal per year at a price of $70 per ton .Bethesda Mining feels that coal production will be 750000 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 average of $64 per ton ,variable costs amount to $29 per ton and fixed costs are $4.2 million per year. The mine will require a net working capital investment of 5percent of sales The NWC will be built up in the year prior to 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 gor reclamation of all the company's strip mines. It is estimated that the cost of reclamation will be $3.9million .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 $7.3 million. Bethesda faces a 38 percent tax rate and has a 12 percent required return on new strip mine projects .Assume a loss in any year will result in a tax credit. Considerations: Considering concerns about environmental impacts of fossil fuels,you have approached by the president of the company with a request to analyse this project based on its business merits and social impacts For the business merits,compare options using net present value,internal rate of returns payback period,and profitability index for the new strip mine For the social impacts ,quantify factors considered using sensitivity analysis and scenario analysis with your rationale.Among the impact of a carbon tax in Ohio.