Midland Corporation The Midland Corporation (MC) was established in 1994, Glenn Jones founded the corporation, which was privately owned at the time. MC was originally formed to provide ship repair services and quickly earned a Department of Defense (DOD) certified Alteration Boat Repair (ABR) designation. Among its specialties were structural welding, piping system installation and repairs, electrical, painting, rigging. machinery and dry-lock work, as well as custom sheet metal fabrication, Other divisions of MC included Habitability Installation, Industrial Contracting, and Alteration/Installation Teams (AIT) In 1998, the company went public and its initial public offering was very successful. The stock price had risen from its initial value of $10 to its current level of $35 per share. There were currently five million shares outstanding. In 1999, the company issued 30-year annual bonds at par, with a face value of $1,000 and a coupon rate of 10% per year, and managed to raise $40 million for expansion. Currently the AA-rated bonds had 25 years left until maturity and were being quoted at 98.5% of par. Over the past year, MC utilized a new method for fabricating composite materials that the firm's engineers had developed. In June of last year, management established the Advanced Materials Group (AM Group), which was dedicated to pursuing this technology. The firm recruited Barry Rock, a senior engineer, to head the AM Group. Barry also had an MBA from a prestigious university under his belt. Upon joining MC, Barry realized that most projects were being approved on a "gut feel" approach. There were no formal acceptance criteria in place. Up until then, the company had been lucky in that most of its projects had been well selected and it had benefited from good relationships with clients and suppliers. Barry stopped into your cubicle and said, This has to change. We can't possibly be this lucky forever. We need to calculate the firm's hurdle rate." Having recently joined the company after graduating from Northwood University, you jump at the opportunity to assist. Great, we are receiving bids for a new project in two weeks, have a report on my desk by then" Barry said. ou begin your project by researching and gathering your data. You contact the Finance Department and they indicate the company has maintained its bond rating since it issued debt and ironically the yield on new debt the same as it was then. The Finance Department also tells you that the 1-year Midland Corporation The Midland Corporation (MC) was established in 1994, Glenn Jones founded the corporation, which was privately owned at the time. MC was originally formed to provide ship repair services and quickly earned a Department of Defense (DOD) certified Alteration Boat Repair (ABR) designation. Among its specialties were structural welding, piping system installation and repairs, electrical, painting, rigging. machinery and dry-lock work, as well as custom sheet metal fabrication, Other divisions of MC included Habitability Installation, Industrial Contracting, and Alteration/Installation Teams (AIT) In 1998, the company went public and its initial public offering was very successful. The stock price had risen from its initial value of $10 to its current level of $35 per share. There were currently five million shares outstanding. In 1999, the company issued 30-year annual bonds at par, with a face value of $1,000 and a coupon rate of 10% per year, and managed to raise $40 million for expansion. Currently the AA-rated bonds had 25 years left until maturity and were being quoted at 98.5% of par. Over the past year, MC utilized a new method for fabricating composite materials that the firm's engineers had developed. In June of last year, management established the Advanced Materials Group (AM Group), which was dedicated to pursuing this technology. The firm recruited Barry Rock, a senior engineer, to head the AM Group. Barry also had an MBA from a prestigious university under his belt. Upon joining MC, Barry realized that most projects were being approved on a "gut feel" approach. There were no formal acceptance criteria in place. Up until then, the company had been lucky in that most of its projects had been well selected and it had benefited from good relationships with clients and suppliers. Barry stopped into your cubicle and said, This has to change. We can't possibly be this lucky forever. We need to calculate the firm's hurdle rate." Having recently joined the company after graduating from Northwood University, you jump at the opportunity to assist. Great, we are receiving bids for a new project in two weeks, have a report on my desk by then" Barry said. ou begin your project by researching and gathering your data. You contact the Finance Department and they indicate the company has maintained its bond rating since it issued debt and ironically the yield on new debt the same as it was then. The Finance Department also tells you that the 1-year
