Through this calculation we conclude that the cost of equity is 11.23%. These are the results we obtain: Company’s Beta of Equity = 1.25 | Find Cost of Equity (Ke) by CAPM | Ke @ EMRP of 5% = .0498+1.25(.05) | 0.11230 | The next step Midland needs to take in order to determine its corporate WACC‚ is to find the cost of debt. We can be more confident in the actual future cost of the debt in the future because it is a set amount of interest paid to debt holders. In the case we are told
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Ermina Dedic Legal Brief 1 Name of Case: Dow Chemical Co. v United States. Court: U.S. Supreme Court Citation: 476 U.S. 227 (1986) Parties and their roles: Dow Chemical (Plaintiffs/Petitioner) and United States (Defendants/ Respondents) Facts: Dow Chemical operates a two-thousand-acre chemical plant at Midland‚ Michigan. The facility‚ with numerous buildings‚ conduits‚ and pipes‚ are visible from the air. Dow has maintained ground security at the
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Janet Mortensen‚ senior vice president of project finance at Midland Energy Resources‚ is in the process of preparing her annual cost of capital estimates for Midland and each of its three divisions (oil and gas exploration and production (E&P)‚ refining and marketing (R&M)‚ and petrochemicals). These estimates are used in many analyses within Midland‚ including capital budgeting decisions‚ financial accounting‚ performance appraisals‚ M&A proposals‚ and stock repurchase decisions. There has been
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OVERVIEW The Dow Chemical Company was a leader company in science and technology‚ offering plastic and agriculture products in 2002. However‚ from 1995‚ Dow Chemical Company had ever lost its profit for several years especially in 1998. Dow Chemical Company tried to stop the decreasing so that it launched an initiative ‘E-epoxy.com venture’ in 2000. The purpose of this project was earning more small customers and spot market customers to increase the market shares. STRENGTH 1. Epoxy was a specialty
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1. How are Mortensen’s estimates of Midland’s cost of capital used? How‚ if at all‚ should these anticipated uses affect the calculations? Janet Mortensen‚ Senior Vice President of project finance for Midland Energy Resources has calculated yearly annual cost of capital investments for Midland and each of its three divisions. The three divisions consist of oil and gas Exploration and Production (E&P)‚ Refining and Marketing (R&M) and Petrochemicals. E&P is Midland’s most profitable
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Understanding the Home Loan Application and Mortgage Approval - The Mortgage Lender Analysis Do You Pass The Mortgage Lender Analysis? When a mortgage lender reviews a real estate loan application‚ the primary concern for both home loan applicant‚ the buyer‚ and the mortgage lender is to approve loan requests that show high probability of being repaid in full and on time‚ and to disapprove requests that are likely to result in default and eventual foreclose. How is the mortgage lenders decision
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Application of Fluorescence Spectroscopy in Chemical Oceanography: Tracing Colored Dissolved Organic Matter (CDOM) Erika Mae A. Espejo 3rd year‚ BS Chemistry‚ University of the Philippines‚ Diliman Abstract Dissolved organic matter (DOM)‚ the fraction passing through a 0.45 µm membrane filter‚ is considered poorly understood mixture of organic polymers because of its complexity. Although it largely influences a lot of biogeochemical processes in aquatic environments‚ its characterization is not
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Midland Energy Resources 1. For what purposes does Mortensen 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? Estimates of the cost of capital were used in many analyses within Midland‚ including asset appraisals for both capital budgeting and financial accounting‚ performance assessments‚ M&A proposals‚ and stock repurchase decisions. Moreover‚ depending
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Midland’s cost of capital 1. I choose the rate of 30-year U.S. Treasury bonds in 2007 (4.98%) as the risk free rate in the 2007 WACC calculations. The reason is that majority of large firms and financial analysts report using long-term yields for bonds to determine the risk-free rate. Rf=0.0498 2. Cost of debt‚ which is determined by adding the spread to Treasury (1.62%) to the rate of 30-year treasury bonds in 2007. Rd=0.0498+0.0162=0.066 3. Cost of equity‚ the EMRP (5%) and D/E (59
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Our company We operate across many areas and you may be surprised about how far our services reach. Derby‚ Nottingham‚ Leicester‚ Sheffield and London St Pancras are our main stations‚ as well as stations as far east as Skegness. Also‚ we have got office-based teams; we have people based at maintenance depots and a team of dedicated people who have a roaming brief to make sure all of our buildings and equipment are maintained. We are a major train operating company: Over 2‚000 employees
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