Discussion Questions 1. As a first step, we need to estimate what percentage of MMM's capital comes from debt, preferred stock, and (As of year end 2013, MMM common equity. This informati 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 on can be found on the firm's latest annual balance sheet. the 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? b. Find MMM's market capitalization, which is the market value of its common equity. Using the sum of its shorts term debt and long-term debt from the balance sheet (we assume that the market value of its debt equals its book value) and its market capitalization, recalculate the firm's debt and common equity weights to be used in the the debt calculation. ce again we can use the CAPM to estimate MMM's cost of equity. From the Inte equation. These weights are approximations of market-value weights. Be sure not to include accrualis different sources for estimates of beta-select the measure that you think is best, and combine this with your of the risk-free rate and the market risk premium to obtain an estimate of its cost of equity. (See the Taking a Look problem in Chapter 8 for more details.) What is your estimate for MMM's cost of equity? Why might it t much sense to use the DCF approach to estimate MMM's cost of equity? net, you can find a number of