We described how to estimate a company's WACC, which is the weighted average of its costs of debt, preferred stock, and common equity. Calculate Minnesota Mining & Manufacturing's (MMM) WACC.

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. This information can be found on the firm's latest balance sheet. 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 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?

b)Find the MMM's market capitalization, which is the market value of its common equity. Using the sum of its short term debt and long term debt from the balance sheet (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 WAA equation. These weights are approximations of market value weights. Be sure not to include accruals in the debt calculation.

Data:

Refer to the link for the financial data :

https://www.nasdaq.com/symbol/mmm/financials?query=balance-sheet