Midland Energy Resources

...

According to Table 1, we can clearly get the percentage of D / V and E / V. For debt costs, it equals risk-free rates plus the expansion of the Treasury. Because we are actually interested in future market risk premiums and often require years of data to more accurately estimate market premiums, we chose 30-year US Treasury yields to be risk-free rates of 4.98%. Thus, for E & P = 4.98% + 1.6% = 6.58%, and R & M = 4.98% + 1.8% = 6.78%. We assume that βD is equal to zero, E & P and R & M unbalanced β are 0.823 and 0.998, respectively, and the D / E mean and average equity β are 0.998, respectively. The leveraged equity of E & P and R & M can be calculated using D & E of E & P and R & M. The final exploration and development cost is 1.523, while the R & M's equity cost is 1.446. In the CAPM model, the equity costs of E & P and R & M were 12.597% and 12.208%. The capital cost of exploration and development capital and R & M is 8.63% and 9.69%, respectively. They are different because different departments have different levels of debt and equity. These estimates come from the average number of companies in each business category, not individually observed.

The method of calculating the capital cost of the petrochemical sector is similar to the above calculation of E & P and M & R, but its debt-to-equity ratio and the value of β need to be averaged over the search for similar firms and then into the calculation.

When the level of leverage is significant, the debt costs and equity costs of the firm will change. When this change is small, the risk of debt financing, equity capital and debt capital will not increase significantly, so equity costs and debt costs in a certain debt ratio will remain unchanged. However, when the debt ratio of enterprises exceeds a certain limit, the financial risk of enterprises increased significantly, equity costs and debt costs began to rise. So the different debt ratio Wyeth equity costs and debt costs increase the rate of difference, the cost of capital performance is the first decline after the rise of U-shaped changes.