Question III: Should Midland use a single corporate hurdle rate for evaluating investment opportunities in all of its divisions? Why or why not? It depends on what kind of investment opportunity is proposed. If it is an investment that affects the company as a whole on the corporate level then they should use a corporate rate. If it is an investment that applies only to specific divisions then that division’s hurdle rate should be used. Using a corporate rate for division specific investments
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1. Cost of capital is the term used in the field of financial investment to refer to the cost of a company’s funds (both debt and equity), or, from an investor’s point of view “the shareholder’s required return on a portfolio of all the company’s existing securities”. It is used to evaluate new projects of a company as it is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet. In the case, Janet Mortensen prepared
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Midland Energy Resources, Inc.: Cost of Capital Case Objectives This case gives you a chance to apply our ideas about cost of capital (WACC) to a real firm with separate divisions. Assignment You are a team of Finance Professionals with experience in analyzing the cost of capital for divisions of companies and companies overall. Janet Mortensen has been struggling with her calculations, wondering if her application is correct given the amount of grumbling she has heard. She has asked
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………………………………………………..18 Industry Growth …………………………………………………………………………18 Concentration …………………………………………………………………………….20 Differentiation ……………………………………………………………………………21 Switching Costs ………………………………………………………………………….22 Economies of Scale …………………………………………………………………….22 Learning Economies of Scale ……………………………………………………….23 Fixed Variable Cost ……………………………………………………………………..24 Threat of New Entrants ………………………………………………………..25 Economies of Scale ………………………………………………………..……………25 First Mover Advantage ………………………………………………………………
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Name: Instructor: Subject: Date: Corporate valuation: Archer-Daniels-Midland Company ADM (Archer-Daniels-Midland) company is one of the world’s largest food processing firms operating over 270 plants worldwide and operating in over 75 countries. Headquartered in Decatur, Illinois, the company is listed on the New York stock exchange main board and is a part of the S&P 500 index. The company is one of the most admired in the US and internationally being named the world’s most admired food production
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FINA 6092 Advanced Financial Management 2014-15 Term 1 Case questions Case #A: Butler Lumber Company Questions 1. Why does Mr. Butler have to borrow so much money to support this profitable business? 2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)? 3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated
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Who Is Archer Daniels Midland? Archer Daniels Midland Company (ADM) is one of the world's leading processors and distributors of agricultural products for food and animal feed, with additional operations in transportation and storage of such products. Archer Daniels Midland was founded in 1902 and incorporated in 1923. Since then, ADM has made a major impact in American productions. In 1902, the founders George A. Archer and John W. Daniels began a linseed crushing business in Minneapolis, Minnesota
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he spread his business across the United States and set up his first Wal-Mart store in 1962. In the next five years he opened 24 more stores and in 1969 Wal-Mart established itself as an incorporated company under the official name, Wal-Mart Stores Inc. (Wal-Mart Corporate, 2013). Phenomenal transformation of national retail business into global retail chains were witnessed in the two decades of 1980's and 1990's. In 1983 Sam's Club was established and was ranked in the top retail chains by the
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Cartwright Lumber Co.by Thomas R. Piper Citigroup 2007: Financial Reporting and Regulatory Capital by Edward J. Riedl, Suraj Srinivasan Clarkson Lumber Co. by Thomas R. Piper Cooper Industries, Inc. by Thomas R. Piper Cost of Capital at Ameritrade by Erik Stafford, Mark L. Mitchell Debt Policy at UST, Inc. by Mark L. Mitchell Dell’s Working Capital by Richard S. Ruback DermaCare: Zapping Zits Directly by Richard G. Hamermesh, Lauren Barley Diageo plc by George Chacko, Peter Tufano Dimensional
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财务管理案例一翻译稿 Midland Energy Resources, Inc.: Cost of Capital 2007年1月下旬，负责Midland能源项目融资的高级副总裁，Mortensen，正在编制Midland及其三个主要业务部门的年度资金成本估算报告。Midland是一个全球性的能源公司，其主要业务为石油和天然气勘探生产（E＆P），炼油与销售（R＆M），以及石化业务。综合起来看，该公司2006年营业额和营业收益分别为248.5亿美元和42.2亿美元。 在Midland内部，很多的分析需要用到资金成本估评，包括：资本预算和财务核算，绩效评估，M&A 提案，以及股票回购的决定。这些分析有些是在部门或业务单位层面来完成的，有些是在公司层面来完成的。早在20世纪80年代初，Midland的企业财务人员就已经开始为公司以及各部门编制年度资金成本估算。然而，由财务人员编制的估算却常受到批评，公司的各部门领导有时会对特定的假设以及使用的数据提出质疑。 2002年，Mortensen，一位直接受命于CFO的资深分析师，被指派去完成Midland公司股票回购资金成
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