1. To make an estimate of the cost of capital of Midland Energy Resources, Inc. It will use this information for asset appraisals for both capital budgeting and financial accounting, performance assessments, M&A proposals, and stock repurchase decisions. 2. 4.98% (30 year) would be the best risk-free rate for Midland since refining and marketing is the largest division in the company and refining and marketing division’s projects are mostly long-term projects. 3. Consolidated: 4.98
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Midland Energy Resources, Inc.: Cost of Capital Case Objectives This case gives you a chance to apply our ideas about cost of capital (WACC) to a real firm with separate divisions. Assignment You are a team of Finance Professionals with experience in analyzing the cost of capital for divisions of companies and companies overall. Janet Mortensen has been struggling with her calculations, wondering if her application is correct given the amount of grumbling she has heard. She has asked
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1. Cost of capital is the term used in the field of financial investment to refer to the cost of a company’s funds (both debt and equity), or, from an investor’s point of view “the shareholder’s required return on a portfolio of all the company’s existing securities”. It is used to evaluate new projects of a company as it is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet. In the case, Janet Mortensen prepared
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Question III: Should Midland use a single corporate hurdle rate for evaluating investment opportunities in all of its divisions? Why or why not? It depends on what kind of investment opportunity is proposed. If it is an investment that affects the company as a whole on the corporate level then they should use a corporate rate. If it is an investment that applies only to specific divisions then that division’s hurdle rate should be used. Using a corporate rate for division specific investments
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………………………………………………..18 Industry Growth …………………………………………………………………………18 Concentration …………………………………………………………………………….20 Differentiation ……………………………………………………………………………21 Switching Costs ………………………………………………………………………….22 Economies of Scale …………………………………………………………………….22 Learning Economies of Scale ……………………………………………………….23 Fixed Variable Cost ……………………………………………………………………..24 Threat of New Entrants ………………………………………………………..25 Economies of Scale ………………………………………………………..……………25 First Mover Advantage ………………………………………………………………
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FINA 6092 Advanced Financial Management 2014-15 Term 1 Case questions Case #A: Butler Lumber Company Questions 1. Why does Mr. Butler have to borrow so much money to support this profitable business? 2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)? 3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated
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Name: Instructor: Subject: Date: Corporate valuation: Archer-Daniels-Midland Company ADM (Archer-Daniels-Midland) company is one of the world’s largest food processing firms operating over 270 plants worldwide and operating in over 75 countries. Headquartered in Decatur, Illinois, the company is listed on the New York stock exchange main board and is a part of the S&P 500 index. The company is one of the most admired in the US and internationally being named the world’s most admired food production
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Lumber Co. by Thomas R. Piper Cartwright Lumber Co.by Thomas R. Piper Citigroup 2007: Financial Reporting and Regulatory Capital by Edward J. Riedl, Suraj Srinivasan Clarkson Lumber Co. by Thomas R. Piper Cooper Industries, Inc. by Thomas R. Piper Cost of Capital at Ameritrade by Erik Stafford, Mark L. Mitchell Debt Policy at UST, Inc. by Mark L. Mitchell Dell’s Working Capital by Richard S. Ruback DermaCare: Zapping Zits Directly by Richard G. Hamermesh, Lauren Barley Diageo plc by George Chacko
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Operational Scorecard 12. Recommendations for the future 1. Introduction to the Company History * An integrated mining and resources producer of zinc, lead, silver and cadmium. * Hindustan Zinc (HZL) was incorporated from the erstwhile Metal Corporation of India on January 10, 1966 as a Public Sector Undertaking. * A subsidiary of Vedanta Resources PLC. The world's the world's largest integrated producer of zinc and second largest zinc producer and the third largest Zinc smelter in
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India's largest ever IPO. Reliance continued to pioneer financing channels in India. In 1993, for example, the company became the first Indian company to raise capital on the foreign market, through a Global Depositary Receipt(GDR) issue in Luxembtheirg. The company completed a second successful GDR issue in 1994. The company used the new capital in part to expand its petrochemicals wing, building the world's largest multi-feed cracker at the Hazira site. The company also added production plants for
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