...Cost of Capital _ Pioneer Petroleum Corporation Copyright © 1991 by the President and Fellows of Harvard College. Harvard Business School Case 292-011. One of the critical problems confronting management and the board of Pioneer Petroleum Corporation in July 1991 was the determination of a minimum acceptable rate of return on new capital investments. The company's basic capital budgeting approach was to accept all proposed investments with a positive net present value when discounted at the appropriate cost of capital. At issue was how the appropriate discount rate would be determined. The company was weighing two alternative approaches for determining a minimum rate of return: (1) a single cutoff rate based on the company's overall weighted average cost of capital, and (2) a system of multiple cutoff rates that reflected the risk-profit characteristics of the several businesses or economic sectors in which the company's subsidiaries operated. The issue had assumed increased importance because of management's decision to extend the use of the cutoff rate to the evaluation of existing operations and investments. It was planned to evaluate divisional managers on the basis of their net profits after the deduction of a charge for capital employed by the division. Pioneer Petroleum had been formed in 1924 through the merger of several for merely independent firms operating in the oil refining, pipeline transportation, and industrial chemicals fields. Over the next 60 years...
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...PIONEER NATURAL RESOURCES versus LAREDO PETROLEUM INC. Financial Statement Analysis and Decision Making Activity Background: PIONEER NATURAL RESOURCES Pioneer Natural Resources (PXD) is a large independent company that focuses primarily on drilling oil and gas exploration, with executive offices located in Irving, Texas. The company was formed in Delaware in 1997, with executive offices located in Irving, Texas. One of the company’s main focuses is to be competitive and to be profitable, so as to develop and produce oil and gas reserves. One way they gain competitive advantage is by employing well-trained and experienced personnel who enable efficient decision-making. The company has a sound development and production strategy. The company focuses efforts towards maximizing its average oil production, NGL’S (Natural, gas, and liquids), gas production through development drilling, production enhancement activities, and acquisition of producing properties. The Company is always looking for ways to improve on oil and gas reserves, and its production through development drilling and conducting other production activities. (Well Recompletions) Pioneer Natural also engages in other activities such as: Exploratory, Integrated, and Acquisition activities. The way the company penetrates its integrated services is to control drilling, operating costs, and to support the execution of its drilling program and operating services. One of the last...
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...Pioneer Petroleum Corporation One of the critical problems confronting management and the board of Pioneer Petroleum Corporation was the determination of a minimum acceptable rate of return on new capital investments, The company’s basic capital budgeting approach was to accept all proposed investments with a positive net present value when discounted at the appropriate cost of capital. At issue was how the appropriate discount rate would be determined. The company was weighing two alternative approaches for determining a minimum rate of return: (1) a single cutoff rate based on the company’s overall weighted average cost of capital, and (2) a system of multiple cutoff rates that reflected the risk-profit characteristics of the several business or economic sectors in which the company’s subsidiaries operated. The issue had assumed increased importance because of management’s decision to extend the use of the cutoff rate to the evaluation of existing operations and investments. It was planned to evaluate divisional managers on the basis of their net profits after the deduction of a charge for capital employed by the division. Pioneer Petroleum had been formed in 1924 through the merger of several formerly independent firms operating in the oil refining, pipeline transportation, and industrial chemical fields. Over the next 80 years, the company integrated vertically into exploration and production of crude oil and marketing refined petroleum products, and horizontally into plastics...
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...Pioneer Petroleum Pioneer Petroleum is a multinational corporation that is in position to capitalize on investments all around the World. Within the industry Pioneer’s gasoline are among the cleanest burning fuels. They are better position than most to meet strict environmental guidelines as they currently have clean efficient running plants positioned to capitalize on less polluted products. Also Pioneer Petroleum is heavily involved in exploration and devilment. From 1924 to the present, pioneer has been able to expand both vertically and diversify horizontally. With such resources and capital, the company has to oversee so many opportunities and ventures. Presently the company is at odds over whether they should use a company wide cut off rate based on the overall weighted average cost of capital or if Pioneer should use multiple rates that reflect risk-profit characteristics of the several businesses or economic sectors. At first we must decide if the methodology used in computing the company’s overall weighted average cost of capital is just. Second, we should decide in which terms Pioneer adheres to future investments. Should they adjust discount rates for different divisions and projects and stay away from a universal cutoff rate? Third, the capital budgeting criteria must be set for different projects across Pioneer’s divisions. What distinctions among projects need to be noted and how the standards should be determined are all questions that arise...
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...PIONEER PETRO EXPLO CONSULTANCY Office # 424, 7th Floor, Mega Tower, Adjacent McDonalds, Main Boulevard Gulberg II, Lahore Lahore-Pakistan. Ph: +92-42-35715564, Fax: +92-42-35715565 35715565 Email: Info@ppec.com.pk Web: http://www.ppec.com.pk Introduction We are proud to announce that we have established a registered and authorized firm. It is not wrong to claim it unique in consultancy services organization comprising of professionals and we are offering technical/legal guidance of competent professionals to all stakeholders, who are involved in the business of import, manufacturing , storage, transportation ,supply , use and handling of petroleum product, Petro chemicals ,compress/liquefied mineral and industrial gases. Vision: To strategically transform in to dynamic player as a service provider in the field of petroleum industry. To become a nationally acclaimed company for its excellence in the service sector of petroleum, explosives, petrochemicals ,transport and allied fields. To innovate the ideas for serving our customer while towing for profile of international standards. So deliver technically superb and economically feasible services, products and solutions to our customers, while meeting the technological and engineering standards. With the fast pace of our journey towards our VISION, we shall adhere to our core values. Mission: Our mission is to service and satisfy our customers by fulfilling their legal/technical/marketing needs with our...
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...Background: The Pioneer Petroleum Corporation is a hydrocarbons-based company, concentrating on oil, gas, coal, and petrochemicals. One of the critical problems confronting management and the board of Pioneer was the determination of a minimum acceptable rate of return on new capital investments. The company's basic capital budgeting approach was to accept all proposed investments with a positive net present value when discounted at the appropriate cost of capital. Further, the company is contemplating using either multiple cutoff rates instead of a single companywide rate to determine the cost of capital for each division. The suggestion was that these multiple cutoff rates would determine the minimum acceptable rate of return on proposed capital investments in each of the main operating areas of the company and would represent the rate charged to each of the various profit centers for capital employed. Issues: Did Pioneer compute WACC correctly and if not what did they do wrong? Compute your own. How should the company determine a minimum rate of return: by (1) a single cutoff rate based on the company's overall WACC or (2) a system of multiple cutoff rates that reflect the risk-profit characteristics of the several businesses? Analysis: Pioneer Petroleum Corporation did not calculate the WACC correctly. Starting with the cost of debt, the formula is Kd = I(1 T) where I is the interest rate and T is the tax rate. The company's tax rate is 34%, however...
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...BOOKS ABOUT TASHTEGO CASE ANALYSIS Rdiana.com TASHTEGO CASE ANALYSIS Updated: 02/26/2015 DISCLAIMER: RDIANA.COM uses the following Tashtego Case Analysis book available for free PDF download which is also related with TASHTEGO CASE ANALYSIS Tashtego Case Analysis can be easily downloaded from our library. Don’t you believe? It is completely free. You just have to register on our site – click on the link below and answer simple questions. It will provide you for free access to Tashtego Case Analysis and other eBooks. We ask you to pass a registration because of hard hackers’ attacks that knock out of service our library and prevent our users from downloading Tashtego Case Analysis as well as other books when it is necessary. When pass the registration, you can be sure of free and unlimited access to Tashtego Case Analysis and lots of other PDF data. Files can be downloaded on your device when you want. Therefore, if you still need Tashtego Case Analysis and cannot download it from other sites, register on our site and get a free access to a rich collection of eBooks right now. Save your time and efforts. PDF FILE: TASHTEGO CASE ANALYSIS Rdiana.com BOOKS ABOUT TASHTEGO CASE ANALYSIS PAGE: 2 TASHTEGO CASE ANALYSIS RR.DVI INSTITUT NATIONAL DE RECHERCHE EN INFORMATIQUE ET AUTOMATIQUE An Average-case Analysis of the Gaussian Algorithm for Lattice Reduction Herve Daude , Philippe Flajolet , Brigitte Vallee N 2798 Fevrier 1996 PROGRAMME 2...
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...Pioneer Petroleum is a multinational corporation that is in position to capitalize on investments all around the World. Within the industry Pioneer’s gasoline are among the cleanest burning fuels. They are better position than most to meet strict environmental guidelines as they currently have clean efficient running plants positioned to capitalize on less polluted products. Also Pioneer Petroleum is heavily involved in exploration and devilment. From 1924 to the present, pioneer has been able to expand both vertically and diversify horizontally. With such resources and capital, the company has to oversee so many opportunities and ventures. Presently the company is at odds over whether they should use a company wide cut off rate based on the overall weighted average cost of capital or if Pioneer should use multiple rates that reflect risk-profit characteristics of the several businesses or economic sectors. At first we must decide if the methodology used in computing the company’s overall weighted average cost of capital is just. Second, we should decide in which terms Pioneer adheres to future investments. Should they adjust discount rates for different divisions and projects and stay away from a universal cutoff rate? Third, the capital budgeting criteria must be set for different projects across Pioneer’s divisions. What distinctions among projects need to be noted and how the standards should be determined are all questions that arise from judging how to proceed forward...
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...Pioneer Petroleum Corporation Ryan Rhodes Dr. Bacon February 18, 2009 Table of Contents Introduction Background……………………………………………………………….. Pg. 3 Major Problems……………………………………………………………. Pg. 5 Analysis Alternative Courses of Action………………………………………………Pg. 6 Analysis of Alternatives……………………………………………………. Pg. 6 Conclusion Suggested Course of Action………………………………………………... Pg. 8 Introduction Background Pioneer Petroleum was formed in 1924 with the merger of several formerly independent firms which operated in the oil refining, pipeline transportation, and industrial chemical fields. Through the next sixty years, the company integrated vertically into exploration and production of crude oil and marketing refined petroleum products and horizontally into plastics, agricultural chemicals, and real-estate development. It was restructured in 1985 as a hydrocarbons-based company, concentrating on oil, gas, coal and petrochemicals. Pioneer at the time was one of the lowest cost refiners on the West Coast and had an extensive West Coast marketing network. In 1990, total revenue exceeded $15.6 billion and net income was over $1.5 billion. Pioneer was subject to extremely volatile prices in oil. Because of this, the management of Pioneer emphasized the importance of operational and financial flexibility to respond to any price swings. Pioneer spent about $3.1 billion on capital expenditures in 1990, and the forecast for 1991 was approximately $4.5 billion...
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...Pioneer Petroleum Corporation’s (PPC) has been through a diverse amount of changes throughout the years. They were originally were a merger of several different independent firms operating in the oil refining, pipeline transportation, and industrial chemicals fields. PPC then integrated vertically into exploration and production of crude oil and marketing refined petroleum products, but horizontally into plastics, agricultural chemicals, and real estate development. They decided to restructure the company into a hydrocarbons-based company, concentrating on oil, gas, coal, and petrochemicals. They needed to decrease their overall risk and optimize their overall performance and would only be able to by collaboration and coordination among their refining and marketing network divisions. PPC were spending billions of dollars on capital expenditures and were expecting an increase in the next year. These expenditures were allowing for the company to process heavy Alaskan crude oil more efficiently and also provided good returns. In the next five years, the company was going to need to meet new environmental standards, which meant more spending increases. Along with these expenditures and regulations were expected higher growths because now the company truly could utilize and capitalize on their strength. PPC’s management and board are weighing out two alternative approaches in order to determine a minimum rate of return. They had to decide if a single cutoff rate based on the...
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...Thursday, January 19: Clarkson Lumber Company Reading: Note on Financial Analysis a. How is the company's financial performance? (Examine appropriate financial ratios.) b. Why has Clarkson Lumber borrowed increasing amounts despite its consistent profitability? c. How has Mr. Clarkson met the financing needs of the company during the period 1993 through 1995? Has the financial strength of Clarkson Lumber improved or deteriorated? d. How attractive is it to take trade discounts? Tuesday, January 24: Clarkson Lumber Company (continued) Reading: a. Note on Financial Forecasting b. Note on Bank Loans a. How much of a loan will Mr. Clarkson need to finance the expected expansion in sales to $5.5 million in 1996 and to take all the trade discounts? (Prepare a projected income statement for 1996 and a pro forma balance sheet as of December 31, 1996.) b. As Mr. Clarkson’s financial adviser, would you urge him to go ahead with, or to reconsider, his anticipated expansion and plans for additional debt financing? c. As the banker, would you approve Mr. Clarkson’s loan request; and if so, what conditions would you put on the loan? Thursday, January 26: SureCut Shears, Inc. a. Evaluate SureCut’s financial performance using standard ratios. b. Why can’t SureCut repay it’s loan on time...
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...SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens: JUSTICE, social, economic and political; LIBERTY, of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation; Page 3 IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day of November, 1949, DO HEREBY ADOPT, ENACT AND GIVE TO OURSELVES THIS CONSTITUTION. Reliance Industries Limited Contents 5 8 14 20 34 37 40 45 49 53 56 59 62 64 65 69 90 94 96 98 99 112 117 4 Dhirubhai Ambani - End Of Era The Reliance Industries Ltd Business Exploration And Production. Petroleum Refining And Marketing Retail Reliance Fresh Reliance Digital Reliance Jewels Reliance Institute Of Life Science – The Clinical Research Services Group Of Reliance Reliance Logistics Reliance Solar Group Relicord Reliance Infrastructure Reliance Communications Reliance Infocomm Reliance Power Ltd Reliance Mutual Funds Investors Relation Reliance : The...
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...Company Background Pioneer Petroleum Corporation (PPC) was formed as a result of several independent firms that operate in oil refining, pipeline transportation, and industrial chemical field merging together. The company has been through several changes since it was established in 1924 and over the years it became an integrated company with many products and services such as plastics, agriculture chemicals, and real-estate development. In 1985, PPC became a hydro-carbons based company, concentrating on oil, gas, coal, and petrochemicals. PPC is also one of the primary producers of Alaskan crude giving it a 60% of their domestic petroleum liquid production. This gives PPC an advantage of being the lowest cost refiners in the West Coast by provide all of Alaskan crude oil, but it also requires a broad marketing network in the West Coast. Therefore, this integration required them to decrease their overall risk and optimize their overall performance through collaboration and coordination. Fact Pattern In 1991, PPC spend about $3.1 billion on capital expenditures and forecasted another capital expenditure of a $4.5 billion in 1991 (an increase from the previous year). However, it was largely due to these expenditures that the company was able to process heavy Alaskan crude oil more efficiently and also get a good return on their investment. For example, the light product yield in their refiners was higher than the industry average. Some of their investments were also...
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...1 Analysis of Vision and Mission Strategy Management Contents 1.ICICI BANK ............................................................................................................................................4 Analysis of Vision: ...............................................................................................................................4 2.BANK OF INDIA.....................................................................................................................................4 Analysis of Mission..............................................................................................................................4 3.CANARA BANK......................................................................................................................................4 Analysis of Vision ................................................................................................................................4 Analysis of Mission..............................................................................................................................4 4.GAIL......................................................................................................................................................5 Analysis of Vision ................................................................................................................................5 5.Infosys................................
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...9:20 pm M, Bryan School (Room 204 Bryan Bldg.)[1] II. Instructor Daniel T. Winkler Office: 324 Bryan Bldg. Phone: 256-0122 E-mail: dt_winkler@uncg.edu Blackboard: http://blackboard.uncg.edu Office Hours: 5:15 pm – 6:15 pm M, 11:15 am – 12:15 pm W, or by appointment III. Prerequisites Prerequisites: MBA 605, 617; Co-requisite is MBA 620 IV. Course Materials Douglas R. Emery, John D. Finnerty, and John D. Stowe. Corporate Financial Management, 3rd Ed., Prentice Hall Publishing (Pearson), 2007. ISBN: 9780132278720. Harvard Business Review Cases (HC) purchased and downloaded online at: http://harvardbusinessonline.hbsp.harvard.edu/b02/en/cases/cases_home.jhtml. Case ordering numbers are given in parentheses next to each case in the Tentative Schedule. HP (Hewlett Packard) 10 B II, 17BII financial calculator or the equivalent. V. Course Description and Purpose The UNCG Graduate Bulletin describes MBA 625 as follows: "Finance in the strategic management process; corporate strategies and shareholder value creation, financing decisions, distribution policy, and long-term investment decisions.” The learning outcomes from this course are as follows: 1. Recognize the role played by the finance function in developing a global strategic plan. 2. Evaluate...
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