Midland Energy Resources, Inc.: Cost of Capital Analysis TABLE OF CONTENTS I. EXECUTIVE SUMMARY ........................................................................................ 2 II. COMPONENT ESTIMATIONS ............................................................................... 2 1. Effective Tax Rate - t ............................................................................................. 2 2. Capital Structure – D/E ..............................................
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Midland Energy Resources, Inc.: Cost of Capital This case describe an global energy company, whose name is Midland, with three operations in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. We are going to calculate the cost of the capital of this company, and answer the following three questions. What are the cost of capital for Midland debt and equity? What is the WACC for Midland? What should be the cost of capital for Midland operational
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Midland Energy Resources, Inc.: Cost of Capital This case describe an global energy company, whose name is Midland, with three operations in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. We are going to calculate the cost of the capital of this company, and answer the following three questions. What are the cost of capital for Midland debt and equity? What is the WACC for Midland? What should be the cost of capital for Midland
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Midland Energy Resource Case Analysis 1. Describe Midland, its capital planning model and Janet Mortensen's role in the case. Midland Energy Resource, Inc. has three major divisions: Exploration & Production (E&P), Refining and Market (R&M), and Petrochemicals. E&P division provides the most profit for Midland. R&M is the largest division in Midland by revenue. Petrochemicals is the smallest division in Midland. Midland’s financial strategy in 2007 consisted of four principals:
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Midland Energy Resources Case Analysis Midland Energy Capital Planning Model • Fund significant overseas growth • As domestic natural resources dwindle, overseas investments are the main drivers of growth for Midland. These investments are analyzed and evaluated is US dollars (foreign cash flows are converted to US dollars) and have a US dollar discount rate applied to them. In 2006, 77.7% of Midland’s total earnings from equity affiliates came from non-US investments. • Invest in value
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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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Midland Energy/Sample 2 Midland Energy Resources, Inc. Midland Energy Resources, Inc. is a global energy company that operates in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. Midland’s most profitable segment is its E&P division which produces 67% of the company’s net income (Exhibit 3). Its largest division is R&M with the Petrochemical division being the smallest. The primary goals of Midland’s financial strategy are to fund substantial overseas
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Cost of Capital Estimate for Midland Energy Resources, Inc. In the first section of my report, I list out the main models and methods applied to estimate the cost of capital for Midland’s three divisions, general assumptions made and the corresponding justifications. In the second section, Calculations, I not only compute the cost of capital based on the general assumptions previously made, but also discuss specifics of each division and the additional adjustments or assumptions made to justify
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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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Midland Energy Resources, Inc.: Cost of Capital Case Solution Total Words: 1930 Excel Calculations: Return on Debt, T-Bills Return, Yield Spread, Beta, Return on Equity, WACC for Midland, Exploration and Production, Refining and Marketing and Petrochemicals. Abstract: Midland Energy Resources has its operations divided amongst three separate divisions. The divisions have different functions and need separate discount rate to evaluate its projects. The cost of capital is very
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