a$.$ Compute $3$ M $\text{'}$s market capitalization using data from its financial report excerpts above. Round to nearest million. million

b$.$ Compute the book value of $3$ M $\text{'}$s debt including operating leases for both years.

Current year $\backslash (\backslash$$ $\backslash )$

Prior year $\backslash$$

c$.$ Compute the fair value of debt including operating leases for the current year.

d$.$ Compare the current year fair value of debt calculated in part $\backslash ($ c $\backslash ).$ to the book value calculated in part $\backslash ($ b $\backslash ).$

The fair value of debt is than the book value, consistent with an in the discount rate used to estimate fair value.

Which of the following are possible reasons for the difference?

e$.$ Compute $3$ M$\text{'}$s cost of debt capital. Round all calculations to two decimal places.

$\backslash [$

$\backslash \%$

$\backslash ]$

f$.$ Compute $3$M$\text{'}$s cost of equity capital. Round all calculations to two decimal places.

$\backslash [$

$\backslash \%$

$\backslash ]$

g$.$ Compute $3$ M $\text{'}$s weighted average cost of capital. Round all calculations to two decimal places. The following information is from $3$M Company.

$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|\}$

$\backslash$hline $\backslash$begin$\{$tabular$\}\{$l$\}$

Liabilities and Equity $\backslash \backslash$

$\backslash$$ millions

$\backslash$end$\{$tabular$\}$ & Current year & Prior year $\backslash \backslash$

$\backslash$hline Short$-$term borrowings and current portion of long$-$term debt & $\backslash$$$1,938$ & $\backslash$$$1,307\backslash \backslash$

$\backslash$hline Accounts payable & $3,183$ & $2\mathrm{.}994\backslash \backslash$

$\backslash$hline Accrued payroll & $692$ & $1\mathrm{.}020\backslash \backslash$

$\backslash$hline Accrued income taxes & $259$ & $260\backslash \backslash$

$\backslash$hline Operating lease liabilities $-$ current & $261$ & $263\backslash \backslash$

$\backslash$hline Other current liabilities & $3\mathrm{.}190$ & $3,191\backslash \backslash$

$\backslash$hline Total current liabilities & $9\mathrm{.}523$ & $9\mathrm{.}035\backslash \backslash$

$\backslash$hline Long$-$term debt & $14,001$ & $16\mathrm{.}056\backslash \backslash$

$\backslash$hline Pension and postretirement benefits & $1\mathrm{.}966$ & $2,870\backslash \backslash$

$\backslash$hline Operating lease liabilities & $580$ & $591\backslash \backslash$

$\backslash$hline Other liabilities & $5,615$ & $3,403\backslash \backslash$

$\backslash$hline Total liabilities & $31,685$ & $31,955\backslash \backslash$

$\backslash$hline Common stock $(\backslash (944,033,056\backslash )$ shares issued$)$ & $9$ & $9\backslash \backslash$

$\backslash$hline Additional paid$-$in capital & $6,691$ & $6\mathrm{.}429\backslash \backslash$

$\backslash$hline Retained earnings & $47,950$ & $45,821\backslash \backslash$

$\backslash$hline Treasury stock, at cost $(394,787,951$ shares$)$ & $\backslash ((33,255)\backslash )$ & $\backslash ((30,463)\backslash )\backslash \backslash$

$\backslash$hline Accumulated other comprehensive income $($loss$)$ & $\backslash ((6,673)\backslash )$ & $(6,750)\backslash \backslash$

$\backslash$hline Total $3$M Company shareholders' equity & $14,722$ & $15,046\backslash \backslash$

$\backslash$hline Noncontrolling interest & $48$ & $71\backslash \backslash$

$\backslash$hline Total equity & $14,770$ & $15,117\backslash \backslash$

$\backslash$hline Total liabilities and equity & $\backslash$$$46,455$ & $\backslash$$$47,072\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

Notes to $3$M$\text{'}$s $10-$K disclose the following information for the current year:

$\backslash$begin$\{$tabular$\}\{|$l$|$r$|\}$

$\backslash$hline $\backslash$multicolumn$\{2\}\{|$c$|\}\{\backslash$begin$\{$tabular$\}\{$c$\}$

Disclosures $\backslash \backslash$

$(\backslash (\backslash$$ $\backslash )$ millions$)$

$\backslash$end$\{$tabular$\}\}\backslash \backslash$

$\backslash$hline Interest expense, from the income statement & $\backslash (\backslash$$ $460\backslash )\backslash \backslash$

$\backslash$hline Weighted average discount rate on operating leases & $\backslash (2\mathrm{.}80\backslash \%\backslash )\backslash \backslash$

$\backslash$hline Tax rate & $\backslash (21\backslash \%\backslash )\backslash \backslash$

$\backslash$hline Fair value of debr $($excluding operating leases$)$ & $\backslash (\backslash$$ $14,442\backslash )\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

The following additional information is from Finance.yahoo at the current year$-$end.

$\backslash$begin$\{$tabular$\}\{|$l$|$r$|\}$

$\backslash$hline Additional Information & $\backslash \backslash$

$\backslash$hline Stock price & $\backslash (\backslash$$ $119\mathrm{.}92\backslash )\backslash \backslash$

$\backslash$hline Market beta & $0\mathrm{.}97\backslash \backslash$

$\backslash$hline Risk$-$free rate & $\backslash (4\mathrm{.}50\backslash \%\backslash )\backslash \backslash$

$\backslash$hline Market risk premium & $\backslash (5\mathrm{.}00\backslash \%\backslash )\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$