Reference no: EM131486014
Business Case Assignment: Midland Energy Resources
Assignment:
Review the Harvard Business School Case (Brief Case) - #4130, dated June 19, 2009
Midland Energy Resources, Inc.: Cost of Capital
In late January 2007, Janet Mortensen, senior vice president of project finance for Midland Energy Resources, was preparing her annual cost of capital estimates for Midland and each of its three divisions. Midland was a global energy company with operations in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. On a consolidated basis, the firm had 2006 operating revenue and operating income of $248.5 billion and $42.2 billion, respectively.
Timothy A Luehrman
joel L. Heilprin
Consider the following in your analysis:
- The main goal for this case is for Janet Mortensen to append a sort of "user guide" in her 2007 calculations;
- If she did append a "user's guide" what might be her guidance for different types of project analysis at Midland such as capital budgeting and financial accounting, performance assessments, M&A proposals, and stock repurchase decisions;
- how might the cost of capital numbers differ or guidance differ for division-level versus corporate-level decisions;
- what guidance might she provide with validating the components used to compute the WACC;
- how would you compute a cost of capital for the Petrochemical division;
- what ‘actual' firm would you use now as a pure play for the Petrochemical division.