Dear Aswath,
First of all, thank you for your great blog. It is really interesting for learning and even for the ones thinking of doing research.
Purpose: Calculate the Value of Financial flexibility of ExxonMobil
ExxonMobil has a really low (book) debt ratio (8%), which is much lower than the industry average and main competitors (around 20-25%). Therefore it can be interesting to understand why.
Calculation:
- Average Investment needs in % of firm value can easily be found
- Average Internal funding capacity in % of form value can easily be found as well.
==> the value of the option can

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* should have 100% debt ratio

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