Term Papers: Compute Midland’s Corporate WACC.  Be prepared to defend it and to discuss cost of debt and cost of equity.

Term Papers: Compute Midland’s Corporate WACC.  Be prepared to defend it and to discuss cost of debt and cost of equity.

1. Describe Midland, its capital planning model and Janet Mortensen’s role in the case.
2. Briefly explain the meaning of the following concepts: cost of capital, WACC, and CAPM.
3. Address what you use “cost of capital” to evaluate.  How are Mortensen’s estimates used at Midland?
4. Compute Midland’s Corporate WACC.  Be prepared to defend it and to discuss cost of debt and cost of equity.
5. Answer: should Midland compute different WACC for each division?  Why or why not?
6. Answer: if you were to compute a WACC for each division, how can we get asset betas for divisions? How should comps be selected?
7. Calculate the WACC for the Petrochemicals Division. Think of the same issues you considered for the Corporate WACC.