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2017-01-0015 FMG 312983964.xlsx
Midland Energy Resources, Inc.: Cost of Capital Key Results WACC 8.51% 8.75% 9.60% 3.86%
Midland Exploration and Production Refining and Marketing Petrochemicals
βA 0.79 0.84 0.98 -0.14
βE 1.36 1.56 1.41 -0.23
WACC for Midland: Equity Beta Current from Exh 5
βE D/E E/V D/V
1.25 59.30% 62.80% 37.20%
Tax Rate
T
38.58%
Formula: (E/V)*βE Now for Target capital Structure again New beta E
βA
βE
Cost of Equity
rf MRP re
Cost of Debt Weightage Average Cost of Capital
rd WACC
0.785
1.36 using E/V=57.8% 4.98% 5.00% 11.77% 6.60% 8.51%
WACC for Exploration and Production:
Cost of Equity
rf MRP re
Cost of Debt Weightage Average Cost of Capital
rd WACC
4.98% 5.00% 12.76% 6.58% 8.75%
Calculations for βA Jackson Energy, Inc.
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2017-01-0015 FMG 312983964.xlsx
D/E 11.20% βA
D/E 11.2/100 0.80
V 111.2
E/V 89.93%
Wide plain petroleum D/E 85.40% βA
D/E 85.4/100 0.65
V 185.4
E/V 53.94%
Corsicana Energy Corp D/E 15.20% βA
D/E 15.2/100 0.96
V 115.2
E/V 86.81%
Worthington Petroleum D/E 47.50% βA
D/E 47.5/100 0.94
V 147.5
E/V 67.80%
0.84 Unlevered Average βA of Industry βE
1.56
WACC for Refining and Marketing:
Cost of Equity
rf MRP re
Cost of Debt Weightage Average Cost of Capital
rd WACC
4.98% 5.00% 12.05% 6.78% 9.60%
Calculations for βA Bexar Energy, Inc D/E 10.30% βA
D/E 10.3/100 1.54
V 110.3
E/V 90.66%
D/E 19.40%
D/E 19.4/100
V 119.4
E/V 83.75%
Kirk Corp
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2017-01-0015 FMG 312983964.xlsx
βA
0.79
D/E 20.90% βA
D/E 20.9/100 1.47
V 120.9
E/V 82.71%
Petrarch Fuel services D/E -12.00% βA
D/E -12/100 0.27
V 88
E/V 113.64%
Arkana Petroleum Corp D/E 32.30% βA
D/E 32.3/100 0.94
V 132.3
E/V 75.59%
Beaumont Energy, Inc. D/E 20.60% βA
D/E 20.6/100 0.86
V 120.6
E/V 82.92%
Dameron Fuel Services D/E 50.30% βA
D/E 50.3/100 0.94
V 150.3
E/V 66.53%
white point energy
0.98 Unlevered Average βA of Industry βE
1.41
WACC for Petrochemicals: We will calculate the βA of Petrochemicals divisions by using the equation: Midland βA
=
0.785 βA of Petrochemicals
Division E&P R&M Petrochemicals
E&P Wa*βA
R&M Wa*βA
0.45
0.35
-0.136 Calc for Asset Weights Assets 140,100 Wa 93,829 Wa 28,450 Wa
0.53 0.36 0.11
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2017-01-0015 FMG 312983964.xlsx
Total Midland Target capital Structure From Table 1 D 40.00%
262,379
E 60.00%
βE
-0.23
Cost of Equity
rf MRP re
4.98% 5.00% 3.85%
Cost of Debt Weightage Average Cost of Capital
rd WACC
6.33% 3.86%
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2017-01-0015 FMG 312983964.xlsx
re 11.77% 12.76% 12.05% 3.85%
for Midland:
Target capital Structure From Table 1 D E 42.20% 57.80% For Tax Income before taxes Tax Tax rate
30,447 11,747 38.58%
Yield to maturity for 30-year US bond Debt payment spread to Treasury
4.98% 1.62%
ration and Production: Target capital Structure From Table 1 D E 46.00% 54.00% For Tax Income before taxes Tax Tax rate
T
Yield to maturity for 30-year US bond Debt payment spread to Treasury
30447 11747 38.58% rf
4.98% 1.60%
Page 5 of 8
2017-01-0015 FMG 312983964.xlsx
D/V 10.07%
βE 0.89
D/V 46.06%
βE 1.21
D/V 13.19%
βE 1.11
D/V 32.20%
βE 1.39
ining and Marketing: Target capital Structure From Table 1 D E 31.00% 69.00% For Tax Income before taxes Tax Tax rate
30447 11747 38.58%
T
Yield to maturity for 30-year US bond Debt payment spread to Treasury