Midland Energy Resources Inc Cost of Capital Brief Case Case SolutionPosted by John Smith on April 12th, 2018 When students possess the British-language PDF of the Brief Case inside a course pack, they'll also can buy an audio version. The senior VP of project finance for any global gas and oil company must determine the weighted average cost of capital for the organization in general and every of their divisions included in the annual capital budgeting process. The case uses comparable companies to estimate resource betas for every operating division, and utilizes the Capital Resource Prices Model to look for the cost of equity. Students are needed to not-lever and re-lever betas and, choose a suitable risk-free rate, and compute costs of debt and equity. Excel CalculationsReturn on Debt, T-Bills Return, Yield Spread, Beta, Return on Equity, WACC for Midland, Exploration and Production, Refining and Marketing and Petrochemicals. Questions CoveredWhat should be the cost of capital for Midland operational divisions? How are Mortensen’s estimates of Midland’s cost of capital used? How, if at all, should these anticipated uses affect the calculations? Is Midland’s choice of an expected market risk premium for equity appropriate? If not, do you have alternatives you might suggest? Calculate Midland’s corporate WACC. Be prepared to defend your specific assumptions about the various inputs to the calculations. Is Midland’s choice of EMRP appropriate? If not, what recommendations would you make and why? Like it? Share it! More by this author |