Estimate the weighted average cost of capital of 3M under the following assumptions. Assumptions: 1. Beta of debt equals 0.04. 2. The firm has no preferred stocks. 

Requirements: 

1. Use daily price data of January 31, 2016 to December 31, 2018, and the Fama-French three factors daily loading during the same window to estimate the beta coefficients of the market premium, size premium and valuation premium for 3M. 

2. Using the daily factor loadings between January 1, 2019 and June 30, 2019, and your estimated coefficient to forecast the daily cost of equity of 3M between January 1, 2019 and June 30, 2019. Note that, the forecasted return is a daily return estimation. You should take the average daily cost of equity and annualize it to get annual cost of equity, and apply it to the WACC formula. 

3. Assume the weight of debt is 49.62%.

Estimate the WACC of 3M.

Answer rating: 100% (QA)

To estimate the weighted average cost of capital WACC for 3M we will follow the given assumptions an... View the full answer