Reasons Against Using a Single Company-Wide Cost of Capital not the use of a single company-wide cost of capital across all business units of ExxonMobil (XOM). This is because different business units face distinct risk levels and cost structures. Therefore, the ExxonMobil-wide cost of capital must be changed for each unit, in hopes of making accurate business decisions. In case, the high cost of capital is used in the task investigation, the organization has a high chance of abandoning some suitable projects or else embarking on projects which are not financially feasible for the organization. Basically, investment projects require high speculation and responsibility which can lead to wrong choices, leading to long-term misfortunes in the organization. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an original essay The fundamental importance of investment projects is to increase the value of the association, which is usually noted in the cost of actions over an indefinite period of time. This implies that the legitimate cost of capital can be used from varying angles and it varies across units of the organization. The most realistic approach is the use of a sustainable cost of capital that depends on the specific organizational risks for different departments. Estimating the Cost of Capital The expansive cost of capital is divided into various offices based on the fixed assets accessible. For example, by repaying debtors and units of value, each division is resolved and balanced with the risk factor that identifies with them to evaluate with practically identical precision the cost of capital. Cost of capital is also used to select various projects for various business units. Individual Source Cost To assess the cost of an individual source of capital for each division, it is essential to assess the weighted average cost of capital (WACC) for each business unit. . Simply put, WACC represents the value of each business unit that is increased relative to its weight and then added together. I will use the formula: WACC = (E/V x Re) + ((D/V x Rd) x (1'T)) Explanations: Re = value of equity Rd = value of debt D = market value of debt of the companyE = equity of the company market valueV = E + DE/V = equity represented by the financing percentageD/V = debt which is represented by the financing percentageTc = corporate tax rate. I will use each source of capital which includes preferred stock, common stock securities, and other long-term debt. As all else remains equal, the company's WACC increases as beta and profit for value increase. The cost of marking specific investments incorporates the value of each fixed asset which incorporates the bond value, value and preferred stock. It is normally simple to determine the post-customs cost of the bond as the entire bond allocated to particular specialized units to decide the value of the bond. The normal cost of capital for each unit is later solved and modified so that the charge effect determines the after-tax cost of the bond. To estimate the cost of capital I will base it on the cost allocated to normal stock which I will decide using dividend discount models and via a model.

Essay / Reasons Against Using a Single Company-Wide Cost of Capital not the use of a single company-wide cost of capital across all business units of ExxonMobil (XOM). This is because different business units face distinct risk levels and cost structures. Therefore, the ExxonMobil-wide cost of capital must be changed for each unit, in hopes of making accurate business decisions. In case, the high cost of capital is used in the task investigation, the organization has a high chance of abandoning some suitable projects or else embarking on projects which are not financially feasible for the organization. Basically, investment projects require high speculation and responsibility which can lead to wrong choices, leading to long-term misfortunes in the organization. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an original essay The fundamental importance of investment projects is to increase the value of the association, which is usually noted in the cost of actions over an indefinite period of time. This implies that the legitimate cost of capital can be used from varying angles and it varies across units of the organization. The most realistic approach is the use of a sustainable cost of capital that depends on the specific organizational risks for different departments. Estimating the Cost of Capital The expansive cost of capital is divided into various offices based on the fixed assets accessible. For example, by repaying debtors and units of value, each division is resolved and balanced with the risk factor that identifies with them to evaluate with practically identical precision the cost of capital. Cost of capital is also used to select various projects for various business units. Individual Source Cost To assess the cost of an individual source of capital for each division, it is essential to assess the weighted average cost of capital (WACC) for each business unit. . Simply put, WACC represents the value of each business unit that is increased relative to its weight and then added together. I will use the formula: WACC = (E/V x Re) + ((D/V x Rd) x (1'T)) Explanations: Re = value of equity Rd = value of debt D = market value of debt of the companyE = equity of the company market valueV = E + DE/V = equity represented by the financing percentageD/V = debt which is represented by the financing percentageTc = corporate tax rate. I will use each source of capital which includes preferred stock, common stock securities, and other long-term debt. As all else remains equal, the company's WACC increases as beta and profit for value increase. The cost of marking specific investments incorporates the value of each fixed asset which incorporates the bond value, value and preferred stock. It is normally simple to determine the post-customs cost of the bond as the entire bond allocated to particular specialized units to decide the value of the bond. The normal cost of capital for each unit is later solved and modified so that the charge effect determines the after-tax cost of the bond. To estimate the cost of capital I will base it on the cost allocated to normal stock which I will decide using dividend discount models and via a model.

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