Estimating Market and Book Values and Cost of Capital Measures The December 31, 2018, partial balance sheet of 3M Company follows (amounts in millions, except share and per share amounts). YCharts.com reported that the total market capitalization of 3M was $108.46 billion and its stock price was $190.54 as of December 31, 2018. Also, YCharts.com estimates its total enterprise value at $119.84 billion, and its market beta at 1.14. 3Ms average pretax borrowing cost is 2.07%, and its assumed statutory tax rate is 21%. Assume that the risk-free rate equals 2.1% and the market premium equals 5%.

Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$1,211
Accounts payable	2,266
Accrued payroll	749
Accrued income taxes	243
Other current liabilities	2,775
Total current liabilities	7,244
Long-term debt	13,411
Pension and post-retirement benefits	2,987
Other liabilities	3,010
Total liabilities	26,652
Equity
3M Company shareholders' equity:
Common stock,par value $0.01 per share Shares outstanding-2018: 576,575,168	$ 9
Additional paid-in capital	5,643
Retained earnings	40,636
Treasury stock	(29,626)
Accumulated other comprehensive income (loss)	(6,866)
Total 3M Company shareholders' equity	9,796
Noncontrolling interest	52
Total equity	9,848
Total liabilities and equity	$36,500

(a) Verify Ycharts.com's computation of 3M's market capitalization using the data from its financial report excerpts above. (Round your answer to two decimal places.) Market capitalization = $Answer

x Answer

shares = $Answer

billion (b) Compute the book value of 3M's long-term debt as of December 31, 2018. $Answer

million (c) Compute the market value of 3M's debt using the data from Ycharts.com. (Round your answer to two decimal places.) $Answer

billion (d) Identify reasons behind the difference between the amounts computed in parts (b) and (c). (Select all that apply.) Answeryesno

The market price of 3M's debt changed in value on December 31, 2018. Answeryesno

The market value of debt doesn't include the issuing of new treasury stock. Answeryesno

The market value and book value of debt differs due to accounting usage of historical cost. Answeryesno

Ycharts.com might include other liabilities, such as lease obligations, in the calculation of debt. (e) Compute 3M's cost of debt capital. (Round your answer to one decimal place.) Answer

% (f) Compute 3M's cost of equity capital. (Round your answer to one decimal place.) Answer

% (g) Using your rounded answer from (e) and (f) above, compute 3M's weighted average cost of capital. Use the market capitalization from Ycharts.com and your rounded answer from (c) above for this calculation.

Do not round until your final answer. Round answer to one decimal place. Answer

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