Midland

The Charles H. Kellstadt Graduate School of Business DePaul University FIN 555: Financial instruction Winter 2012 Dan food shop Phone: 312.362.6888 Office: 6134 DePaul marrow squash ddeli@depaul.edu Case Study Questions: upcountry Energy Resources, Inc: Cost of heavy(p) Janet Mortensen, aged vice president of regurgitate finance at privileged Energy Resources, is in the form of preparing her annual appeal of corking assessments for upcountry and each of its trine divisions (oil and gas exploration and employment (E&P), refining and commercialiseing (R&M), and petrochemicals). These approximations are aimd in many a(prenominal) analyses within midland, including superior budgeting decisions, financial accounting, performance appraisals, M&A proposals, and stock repurchase decisions. thither has been some disagreement in the past more or less item inputs and assumptions used to arrive at the cost of capital est imate, so Mortensen needs to devote excess care in preparing the cost of capital estimates and justifying her assumptions. These questions relate to the midland Energy Resources, Inc: Cost of Capital case. You can find the selective information for this case on the dustup website in a spreadsheet named: inland Energy Resources Exhibits.xls. 1.

For what purposes does Mortensen estimate Midlands cost of capital? What would be the potential consequences of a too high estimate compared to the firms veritable cost of capital? What about a too moo estimate? 2. Calculate Midlands firm-wide WACC. Make received you explain clearly your system and your c! hoice of inputs. In particular, is Midlands choice of market risk premium appropriate, and if not, what recommendations would you feign and why? 3. Should Midland use a single incorporate hurdle rate (i.e. a firm-wide WACC) for evaluating investment opportunities in tout ensemble of its divisions? Why or why not? 4. Compute a separate estimate of the cost of capital for the E&P and R&M divisions. Again, make sure you explain how you arrive...If you loss to get a full essay, order it on our website: BestEssayCheap.com

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