Exxon Mobil ( 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 Exxon Mobil 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.

a. Would you recommend that Exxon Mobil 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 Exxon Mobil? 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.