Once again, we can use the CAPM to estimate MMM’s cost of equity. Thomson One provides various estimates of beta—select the measure that you believe is best and combine this with your estimates of the risk-free rate and the market risk premium to obtain an estimate of its cost of equity. What is your estimate for the cost of equity? Why might it not make much sense to use the DCF approach to estimate MMM’s cost of equity?

Access the Thomson ONE problems though the ThomsonNOW Web site. Use the Thomson

ONE—Business School Edition online database to work this chapter’s questions.

Calculating 3M’s Cost of Capital In this chapter we described how to estimate a company’s WACC, which is the weighted average of its costs of debt, preferred stock, and common equity. Most of the data we need to do this can be found in Thomson One. Here, we walk through the steps used to calculate Minnesota Mining & Manufacturing’s (MMM) WACC.