Midland Energy Resources, Inc.
Cost of Capital
Table of Contents
I. Executive Summary
III. Cost of Capital
IV. Risk & Tax Rate
V. Capital Structures
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 (R&M), natural gas, and petrochemicals. Janet Mortensen, the senior vice president of project finance for Midland Energy Resources must determine the weighted average cost of capital (WACC) for the company as a whole and each of its divisions as part of the annual capital budgeting process. Various considerations have to be evaluated as risk factors when calculating the cost-of capital. II. Introduction
Midland Energy Resources is a leading global energy developer dedicated to providing advanced power systems and energy services around the world. Midland Energy Resources has three divisions Exploration & Production, Refining & Marketing, and Petrochemicals. They have been incorporated more than 120 years previously and they have 80,000 employees in 2007. Exploration & Production business include oil and natural gas exploration and field development and production is there most profitable business with the highest net margin in the industry over the previous 5 years. With continued growth expectations Midland is set to increase capital spending to meet growing demand. Midland’s operations include 40 refineries with distillation capacity of 5.0 million barrels a day. However with Midland marketing a comprehensive range of refined oil products worldwide they rank the largest division and investments will remain steady. Petrochemicals are chemical products made from raw materials of petroleum. Although, petrochemical is a very large growing business Midland’s...
References: 1. http://www.investopedia.com/terms/c/costofdebt.asp
2. Harvard Business Publishing, Midland Energy Resources, Inc.: Cost of Capital.
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