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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, 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. 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.
The 2012 NCAA Men's final game between Kentucky and Kansas came in at 10.8 / 18.4 . While not a ratings record for the game, industry experts considered it a success. Assume that there are 114 million American households with televisions.
Amarillo Parts is considering purchasing a small firm in the same line of business. The purchase would be financed by either the sale of common stock or by a bond issue. What is the degree of financial leverage for each plan at $7,000,000 of EBIT? Wh..
Should the analysts be worried about the dollar depreciating or appreciating and if the FI decides to hedge using options, should the FI buy put or call options to hedge the CD payment? Why
You have been asked to calculate the beta coefficient for a common stock. Discuss what specific data you would collect and what calculations are necessary to obtain the beta coefficient?
Size-up HCM using historical ratio analysis and a discussion of its business risk and financial risk and the Q1 tab reproduces HCM's financial statements and forecasts for your convenience.
You purchase a bond with an invoice price of $1,048. The bond has a coupon rate of 5.7 percent, and there are four months to the next semi-annual coupon date. What is the clean price of the bond? (Do not round intermediate calculations and round your..
Walker & Campsey wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires an up-front cost of $100,000, after which it generates positive after-tax cash flows of $60,000 at the end of each..
Stock Y issued a dividend of $2.00 today which is expected to grow at 4% for the next 5 years and then grow at a constant rate of 2% after that. The required return is 10%. Using DDM what is the estimate of the current stock price?
Juanita has an opportunity to invest in her friend's clothing store. The initial investment is $10,700 and the expected annual cash flows thereafter are as follows: {$400; $500; $1,000; $2,000; $2,000; $4,000; $4,000}. What is Juanita's IRR on this i..
Suppose an Exxon Corporation bond will pay $9,138 41 years from now. If the going interest rate on similar 41-year bonds is 2.26%, how much is the bond worth today? State your answer in whole dollars.
Willis currently has $120,000 invested in a four-stock portfolio with a beta coefficient equal to 0.8. Willis plans to sell one of the stocks in his portfolio for $48,000, which will increase the portfolios beta to 1.0. What is the beta coefficient o..
Happy Enterprises currently has an operating cycle of 62 days. The firm is analyzing some operational changes, which are expected to increase the accounts receivable period by 2 days and decrease the inventory period by 5 days. The accounts payable t..
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