Midland: Cost and Equity Market Risk Essay

Midland Energy [pic] Midland Energy Resources, Inc. Cost of Capital Table of Contents I. Executive Summary II. Introduction III. Cost of Capital IV. Risk & Tax Rate V. Capital Structures VI. WACC VII. Conclusion VIII. References I. Executive Summary Midland Energy Resources is a global energy company with operations in oil and gas exploration and production(E&P) providing a broad array of products and services to upstream oil and gas customers worldwide including refining and marketing

1.) How does Midland determine that shares are undervalues? Midland Energy Resources determine that the shares are undervalued with a comparing from the intrinsic value of the shares and the actual stock price. The intrinsic value can be computed with the fundamental value of the enterprise minus the market value of debts divided per the number of shares outstanding. For calculate the fundamental value of the enterprise, Midland Energy Resources has to sum up all discounted future net cash flows

Midland Energy Resources, Inc. 1.0-Case Brief/Summary Midland Energy Resources, Inc. (?Midland?) is a leading global energy firm with an array of energy product and services. Midland operates under three distinctive business segments. The E&P segment entails searching for viable underground or underwater gas and oil fields, by drilling the exploratory wells, and afterward operating these wells that recover, bringing raw natural gas and crude oil to the surface. The R&M segment deals in base-stock

estimate Midland's cost of capital? What would be the potential consequences of a too high estimate compared to the firm's “true” cost of capital? What about a too low estimate? The purpose is that the cost capital will be used for capital budgeting, financial accounting, performance assessment, stock repurchases estimations. Also the cost of capital is a necessary basis for the expected growth and forecasted demand. The too high estimated cost of capital means that Midland may miss out on investment

Midland Resources 1. How are Mortensen’s estimates of Midland’s costs of capital used? How, if at all, should these anticipated uses affect the calculations? The cost of capital is the minimum acceptable rate of return for new investments in the corporation. Estimates of Midland’s cost of capital are used in many analysis within Midland, including asset appraisal for both capital budgeting and financial accounting, performance assessments, M&A proposals, and stock repurchase decisions. These

Executive Summary The cost of capital is calculated for Midland on a firm-wide and divisional level in this paper. On a divisional level, asset betas of 0.9325 and 1.0490 are calculated for E&P and R&M respectively based on comparable firms. The asset beta for PC is back-calculated based on a formula relating the divisional betas to the firm-wide beta, thus resulting in 0.4517. Divisional betas are re-levered at target D/E ratios as provided in the case and the resulting costs of equity (using a simple

Midland is a global energy company with three separate divisions, oil and gas exploration and production, refining and marketing, and petrochemicals. Exploration and production of oil and gas was Midlands most profitable business making $12.6 billion after-tax earnings and $22.4 billion of revenue, extracting about 2.10 barrels of oil per day in 2006. Petrochemicals’ was the least profitable business, making $2.1 billion after-tax in earnings. Midland had been incorporated 120 years before 2009

this case study of Midland Energy Resources, Inc. The cost of capital of the company and its subdivisions are evaluated. To undertake different calculations such as; The asset beta, Weighted Average Cost of Capital (WACC). Midland is a global company that performs operations of oil, gas, refining and marketing of petrochemical products. Within this work is analyzed as the company to maintained a profit margin in recent years by making the calculation of cost of capital. The cost of capital are the

#1 Mortensen’s estimates of Midlands’s cost of capital are. The Mortensen’s estimates are used for Asset appraisals for capital budgeting and accounting, assessment of performance analysis, merger and acquisition possible proposals, and possible stock repurchasing/issuing decisions or dividends and retained earnings. The Cost of capital is an essential component in WACC calculations. #2 Mortensen computed the cost of debt for each division by adding a premium, or spread, over the U.S Treasury’s

1. How are Mortensen’s estimates of Midland’s cost of capital used? How, if at all, should these anticipated uses affect the calculations? Mortensen’s cost of capital estimates are used for a variety of purposes at both the divisional and corporate levels. Examples include internal analyses such as financial accounting, performance assessment and capital budgeting, while others are used for strategic planning purposes such as merger and acquisition, as well as stock repurchase decisions (Luehrman