1. Define the term cost of capital.
2. In 2009, ExxonMobil (XOM) announced its intention to acquire XTO Energy for $41 billion. The acquisition provided ExxonMobil an opportunity to engage in the development of shale and unconventional natural gas resources within the continental United States. This acquisition added to ExxonMobil’s existing upstream (exploration and development) activities. In addition to this business segment, ExxonMobil was also engaged in chemicals and downstream operations related to the refining of crude oil into a variety of consumer and industrial products. How do you think the company should approach the determination of its cost of capital for making new capital investment decisions?
