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To evaluate these goals, Midland must calculate an appropriate cost of capital. Currently, Midland uses a single corporate cost of capital of 8.13% to evaluate all investments across its divisions. However, each division has different risk profiles and financial positions.
10 Σεπ 2014 · This document provides an overview of Midland Energy Resources' capital budgeting case. It introduces the presenters and objectives, which are to recommend a weighted average cost of capital (WACC) for the corporate level and divisions.
Midland Energy Resources, Inc. is a global energy company with operations in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. This case study gives the students the opportunity to calculate a company's weighted average cost of capital as a whole and each of its divisions as part of the annual ...
In funding overseas growth, Midland must use its cost of capital to analyze, evaluate, and convert foreign cash flows. In evaluating value-adding projects, the cost of capital must be used to discount project cash flows.
10 Οκτ 2012 · The document provides information to calculate the weighted average cost of capital (WACC) for various divisions within Midland corporation. It discusses how Mortensen's estimates of Midland's cost of capital are used for various purposes.
Janet Mortensen, the senior vice president of project finance for Midland Energy Resources, has been asked to calculate the weighted average cost of capital (WACC) for the company as a whole, as well as each of its three divisions as part of an annual budgeting process.
The case uses comparable companies to estimate asset betas for each operating division, and employs the Capital Asset Pricing Model to determine the cost of equity. Students are required to un-lever and re-lever betas and, choose an appropriate risk-free rate, and compute costs of debt and equity.
