Discussion Questions common equity. This information can be found on the firm's latest annual balance sheet. (As of year end 2013, MMM had no preferred stock.) Total debt includes all interest-bearing debt and is the sum of short-term debt and long-term debt a. Recall that the weights used in the WACC are based on the company's target capital structure. If we assume that 1. As a first step, we need to estimate what percentage of MMM's capital comes from debt, preferred stock, and he company wants to maintain the same mix of capital that it currently has on its balance sheet, what weights should you use to estimate the WACC for MMM? Find MMM's market capitalization, which is the m term debt and long-term debt from the balance sheet (we assume that the market value of its debt equals its bo value) and its market capitalization, recalculate the firm's debt and common equity weights to be used in WACC equation. These weights are approximations of market-value weights. Be sure not to include ac the debt calculation. arket value of its common equity. Using the sum of its short ok b. crua 2. Once again we can use the CAPM to estimate MMM's cost of equity. From the Internet, you can find a number different sources for estimates of beta-select the measure that you think is best, and combine this with your esco of the risk- of tes a Closer free rate and the market risk premium to obtain an estimate of its cost of equity . (See the Taking in Chapter 8 for more details.) What is your estimate for MMM's cost of equity? Why might it not much sense to use the DCF approach to estimate MMM's cost of equity? Discussion Questions common equity. This information can be found on the firm's latest annual balance sheet. (As of year end 2013, MMM had no preferred stock.) Total debt includes all interest-bearing debt and is the sum of short-term debt and long-term debt a. Recall that the weights used in the WACC are based on the company's target capital structure. If we assume that 1. As a first step, we need to estimate what percentage of MMM's capital comes from debt, preferred stock, and he company wants to maintain the same mix of capital that it currently has on its balance sheet, what weights should you use to estimate the WACC for MMM? Find MMM's market capitalization, which is the m term debt and long-term debt from the balance sheet (we assume that the market value of its debt equals its bo value) and its market capitalization, recalculate the firm's debt and common equity weights to be used in WACC equation. These weights are approximations of market-value weights. Be sure not to include ac the debt calculation. arket value of its common equity. Using the sum of its short ok b. crua 2. Once again we can use the CAPM to estimate MMM's cost of equity. From the Internet, you can find a number different sources for estimates of beta-select the measure that you think is best, and combine this with your esco of the risk- of tes a Closer free rate and the market risk premium to obtain an estimate of its cost of equity . (See the Taking in Chapter 8 for more details.) What is your estimate for MMM's cost of equity? Why might it not much sense to use the DCF approach to estimate MMM's cost of equity