Exxon Mobil ( XOM) is one of the half- dozen major oil companiesin the world. The firm has four primary operating divisions (upstream, downstream, chemical, and global services) as well as anumber of operating companies that it has acquired over the years.A recent major acquisition was XTO Energy, which was acquired in2009 for $ 41 billion. The XTO acquisition gave Exxon Mobil asignificant presence in the development of domestic unconventionalnatural gas resources, including the development of shale gasformations, which was booming at the time. Assume that you havejust been hired to be an analyst working for ExxonMobil’s chieffinancial officer. Your first assignment was to look into theproper cost of capital for use in making corporate investmentsacross the company’s many business units.
a. Would you recommend that Exxon Mobil use a single company-wide cost of capital for analyzing capital expenditures in all itsbusiness units? Why or why not?
b. If you were to evaluate divisional costs of capital, howwould you go about estimating these costs of capital for ExxonMobil? Discuss how you would approach the problem in terms of howyou would evaluate the weights to use for various sources ofcapital as well as how you would estimate the costs of individualsources of capital for each division.
Need some detailed answer without plagiarism.
