will depend on when the cash flow is expected to occur and depend upon the period over which investors want the return to be guaranteed. Consequently, we need to take the time horizon into consideration to find out the most suitable risk-free rate. Midland Energy Resources is a well-established company with 120-year history. It is not a company which relies on seeking special opportunity to earn instant profit so that 1-Year T-bond rate is obviously not a proper option. Instead, a long-term development
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level (Exploration & Marketing (“E&P”), Refining & Marketing (“R&M”) as well as Petrochemicals (“Petro”)). These uses affect different areas of the firm by changing various parts of the Weighted Average Cost of Capital (“WACC”). Such changes could happen to anyone of the parts of “WACC” (parts listed in excel document). Also, since anyone of the uses listed previously could be for an individual business unit or Midland as a whole these “WACC” formulas need to be calculated. This is due to the fact
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Midland Energy Midland Energy Resources Inc.: Cost Of Capital Introduction Midland Energy Resources have a senior vice president, Janet Mortension, of project finance. She was preparing her annual cost of capital for midland as well as for each of its following three divisions: * Exploration & production (E&P) * Refining & Marketing (R&M) * Petrochemicals Midland was a global company with operations in oil and gas. Midland corporate treasury had began analysis and preparation of annual cost
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Midland Energy Resource Case Analysis I. Midland’s capital planning model and Janet Mortensen's role. The capital-planning model adopted by Midland is MACC, standing for weighted average cost of capital. The primary role of Janet Mortensen is frequently calculating corporate and divisional costs of capital at division level as well as corporate level. In addition, she also needs to check the appropriateness of her calculation and append “user`s guide” to it. Evaluating M&A proposals, stock
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Division Date: October 7, 2013 Re: Midland Energy Resources Inc. Weighted Average Cost of Capital Midland Energy Resources Inc. is a publicly traded company that primarily deals in the energy industry. The company itself is divided into three major operational divisions, two of which that is concerning to the company include: Oil and Gas Exploration and Production (E&P) and Refining and Marketing (R&M). The Petrochemicals division will not be addressed. Going forward, Midland Energy would like to undertake
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1. How are Mortensen’s estimates of Midland’s cost of capital used? How, if at all, should these anticipated uses affect the calculations? Mortensen’s cost of capital estimates are used for a variety of purposes at both the divisional and corporate levels. Examples include internal analyses such as financial accounting, performance assessment and capital budgeting, while others are used for strategic planning purposes such as merger and acquisition, as well as stock repurchase decisions (Luehrman
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Management Prof. Joseph Vu Case Study Questions: Midland Energy Resources, Inc: Cost of Capital Janet Mortensen, senior vice president of project finance at Midland Energy Resources, is in the process of preparing her annual cost of capital estimates for Midland and each of its three divisions (oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals). These estimates are used in many analyses within Midland, including capital budgeting decisions, financial
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Introduction Midland Energy Resources have a senior vice president, Janet Mortension, of project finance. She was preparing her annual cost of capital for midland as well as for each of its following three divisions: * Exploration & production (E&P) * Refining & Marketing (R&M) * Petrochemicals Midland was a global company with operations in oil and gas. Midland corporate treasury had began analysis and preparation of annual cost of capital for the corporation as a whole
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Midland Energy Resources Inc.: Cost Of Capital Introduction Midland Energy Resources have a senior vice president, Janet Mortension, of project finance. She was preparing her annual cost of capital for midland as well as for each of its following three divisions: * Exploration & production (E&P) * Refining & Marketing (R&M) * Petrochemicals Midland was a global company with operations in oil and gas. Midland corporate treasury had began analysis and preparation of annual cost of capital for
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How, if at all, should these anticipated uses affect the calculations? The cost of capital is the minimum acceptable rate of return for new investments in the corporation. Estimates of Midland’s cost of capital are used in many analysis within Midland, including asset appraisal for both capital budgeting and financial accounting, performance assessments, M&A proposals, and stock repurchase decisions. These estimates are used at the divison or the business unit level and also on the corporate level
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