FIN 620 – 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 vic

FIN 620 – 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.