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ExxonMobil (XOM) is one of the half-dozen major oil companies in the world. The firm has four primary operating divisions (upstream, downstream, chemical,

ExxonMobil (XOM) is one of the half-dozen major oil companies in the world. The firm has four primary operating divisions (upstream, downstream, chemical, and global services) as well as a number of operating companies that it has acquired over the years. A recent major acquisition was XTO Energy, which was acquired in 2009 for $ 41 billion. The XTO acquisition gave ExxonMobil a significant presence in the development of domestic unconventional natural gas resources, including the development of shale gas formations, which was booming at the time. Assume that you have just been hired to be an analyst working for ExxonMobil’s chief financial officer. Your first assignment was to look into the proper cost of capital for use in making corporate investments across the company’s many business units.

a. Would you recommend that ExxonMobil use a single company-wide cost of capital for analyzing capital expenditures in all its business units? Why or why not?

b. If you were to evaluate divisional costs of capital, how would you go about estimating these costs of capital for ExxonMobil? Discuss how you would approach the problem in terms of how you would evaluate the weights to use for various sources of capital as well as how you would estimate the costs of individual sources of capital for each division.

Respond to the scenario above in 600-750 words (2-3 pages); APA 7.0 format. Your paper must include at least two scholarly journal references (in addition to your book). 

Your paper will be automatically submitted to Turnitin in the assignment dropbox. Originality reports will be returned to the faculty and students. For full credit, make sure that your Similarity Index does not exceed 25%.

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