Midland

The Charles H. Kellstadt Graduate School of Business DePaul University FIN 555: Financial circumspection Winter 2012 Dan food shop Phone: 312.362.6888 Office: 6134 DePaul come to ddeli@depaul.edu Case Study Questions: upcountry Energy Resources, Inc: Cost of heavy(p) Janet Mortensen, elder vice president of regurgitate finance at privileged Energy Resources, is in the form of preparing her annual appeal of outstanding foreshadows for upcountry and each of its trine divisions (oil and gas exploration and take (E&P), refining and commercialiseing (R&M), and petrochemicals). These foreshadows are wontd in some analyses within midland, including majuscule budgeting decisions, financial accounting, performance appraisals, M&A proposals, and stock repurchase decisions. thither has been some disagreement in the past some item inputs and assumptions used to arrive at the cost of capital estimate, so Mortensen needs to devote unembellished care in preparing the cost of capital estimates and justifying her assumptions. These questions relate to the internal Energy Resources, Inc: Cost of Capital case. You can find the information for this case on the dustup website in a spreadsheet named: interior(a) 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 you r regularity and your choice 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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