Which are the best comparables and why for each of the two business units?

Which ones would you exclude if any and why?

What comparable companies have a higher leverage and how is that affecting the overall risk for the investor?

B D E F G H I J K L Industry Benchmark (Comparable Companies ) Fill in and calculate all cells that are pink-highlighted. Assumptions: Marginal Tax Rate 40.0% Asset Beta D/E $ Exploration & Production: Jackson Energy, Inc. Wide Plain Petroleum Corsicana Energy Corp. Worthington Petroleum Average Equity Market Value $ 57,931 $ 46,089 42,263 27,591 Net Debt 6,480 39,375 6,442 13,098 Equity Beta 0.89 1.21 1.11 1.39 LTM Revenue 18,512 $ 17,827 14,505 12,820 LTM Eamings 4,981 8,495 4,467 3,506 $ FA Refining & Marketing: Bexar Energy, Inc. Kirk Comp. White Point Energy Petrarch Fuel Services Arkana Petroleum Comp. Beaumont Energy, Inc. Dameron Fuel Services Average 60,356 $ 15,567 9,204 2,460 18,363 32,662 48,796 6,200 3,017 1,925 (296) 5,931 6,743 24,525 1.70 0.94 1.78 0.24 1.25 1.04 1.42 $ 160,708 $ 67,751 31,682 18,874 49,117 59,989 58,750 9,560 1,713 1,402 112 3,353 1,467 4,646 Midland Energy Resources $ 134,114 1.25 $ 251,003 $ 18,888 . NOTE: Calculate the Asset Beta (Unlevered Beta) in column J. To do that correctly, first calculate the applicable D/E weights in column H. Equity Beta = Levered Beta Equity Beta is a measure of risk that takes into account the capital structure of the business unit. Different businesses have different capital structure ( i.e.: different amount of debt and equity) Asset Beta = Unlevered Beta You must calculate Asset Beta to understand the risk characteristics. Asset beta is a measure of risk that does not take capital structure into account. You need to calculate Asset beta using fomula given in class. The resulting number measures the risk of operating/investing the business regardless of capital structure preferences. B D E F G H I J K L Industry Benchmark (Comparable Companies ) Fill in and calculate all cells that are pink-highlighted. Assumptions: Marginal Tax Rate 40.0% Asset Beta D/E $ Exploration & Production: Jackson Energy, Inc. Wide Plain Petroleum Corsicana Energy Corp. Worthington Petroleum Average Equity Market Value $ 57,931 $ 46,089 42,263 27,591 Net Debt 6,480 39,375 6,442 13,098 Equity Beta 0.89 1.21 1.11 1.39 LTM Revenue 18,512 $ 17,827 14,505 12,820 LTM Eamings 4,981 8,495 4,467 3,506 $ FA Refining & Marketing: Bexar Energy, Inc. Kirk Comp. White Point Energy Petrarch Fuel Services Arkana Petroleum Comp. Beaumont Energy, Inc. Dameron Fuel Services Average 60,356 $ 15,567 9,204 2,460 18,363 32,662 48,796 6,200 3,017 1,925 (296) 5,931 6,743 24,525 1.70 0.94 1.78 0.24 1.25 1.04 1.42 $ 160,708 $ 67,751 31,682 18,874 49,117 59,989 58,750 9,560 1,713 1,402 112 3,353 1,467 4,646 Midland Energy Resources $ 134,114 1.25 $ 251,003 $ 18,888 . NOTE: Calculate the Asset Beta (Unlevered Beta) in column J. To do that correctly, first calculate the applicable D/E weights in column H. Equity Beta = Levered Beta Equity Beta is a measure of risk that takes into account the capital structure of the business unit. Different businesses have different capital structure ( i.e.: different amount of debt and equity) Asset Beta = Unlevered Beta You must calculate Asset Beta to understand the risk characteristics. Asset beta is a measure of risk that does not take capital structure into account. You need to calculate Asset beta using fomula given in class. The resulting number measures the risk of operating/investing the business regardless of capital structure preferences