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Exxon Mobil Analysis

In: Business and Management

Submitted By jwheeler2
Words 319
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Exxon’s yield is higher than the other AAA bonds, which is probably the reason why they have outstanding bonds worth more than 7 billion dollars. Exxon’s cost of equity when you use the CAPM method , you get a number slightly smaller than if you were using the bond -yield -risk premium method; more than likely because Exxon’s beta yield so low that it decreases the riskiness of their stock. The difference between the book value and market value is very obvious. When we took the book value the weights of debt and equity came very close. The weights of debt was used was 51% whereas the weights of equity used was 49%. Comparing this to the market value the weight of debt being nearly 3% while equity overshadows at the 97%.
Although the book and market weights differ substantially their WACC doesn’t vary much; the book value cost of capital being 3.8% and the market value being 4%.Should Exxon take on project A, with a NPV of over 182 million and an IRR of about 26%, we would agree to definitely accept. But , you really cant say that without doing sensitivity analysis. We choose to do the analysis on the cost of capital because that’s what I feel could fluctuate the most. Even at rates of 3% to 6%. The NPV didn’t move much which allows me to assume this is a pretty safe project for the company to take on.

Rf page , AAA corporate yeild , 10 year Treasury Yeild and Treasury Yeild , Exxon Beta
S & P 500 Yeild bond shares outstanding and price...

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