1. As a first step we need to estimate what percentage of MMM’s capital comes from long-term debt, preferred stock, and common equity. If we click on FINANCIALS, we can see immediately from the balance sheet the amount of MMM’s long-term debt and common equity (as of mid-2008, MMM had no preferred stock). Alternatively, you can click on FUNDAMENTAL RATIOS in the next row of tabs below and then select WORLDSCOPE’S BALANCE SHEET RATIOS. Here, you will also find a recent measure of long-term debt as a percentage of total capital.

Recall that the weights used in the WACC are based on the company’s target capital structure. If we assume the company wants to maintain the same mix of capital that it currently has on its balance sheet, then what weights should you use to estimate the WACC for MMM? (In Chapter 15, we will see that we might arrive at different estimates for these weights if we assume that MMM bases its target capital structure on the market values, rather than the book values, of debt and equity.)