The 3M Company is a global diversified technology company active in the following product markets: consumer and office; display and graphics; electronics and communications; health care; industrial; safety, security, and protection services; and transportation. At the consumer level, 3M is probably most widely known for products such as Scotch® Brand transparent tape and Post-it® notes. Exhibit 12.11 presents information from the statement of cash flows and income statement for the 3M Company for 2006–2008. From 2006 through 2008, 3M increased cash and cash equivalents. Assume that 3M considers these increases in cash and cash equivalents to be necessary to sustain operating liquidity. The interest income reported by 3M pertains to interest earned on cash and marketable securities. 3M holds only small amounts of investments in marketable securities. 3M’s income tax rate is 35 percent.

Required

a. Beginning with cash flows from operating activities, calculate the amount of free cash flows to all debt and equity capital stakeholders for 3M for 2006, 2007, and 2008.

b. Beginning with cash flows from operating activities, calculate the amount of free cash flows 3M generated for common equity shareholders in 2006, 2007, and 2008.

c. Reconcile the amounts of free cash flows 3M generated for common equity shareholders in 2006, 2007, and 2008 from Part b with 3M’s uses of cash flow for equity shareholders, including share repurchases and dividend payments.

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EXHIBIT 12.11 3M Company Selected Information from the Staterment of Cash Flows (amounts in millions) (Problem 12.10) 2008 2007 2006 4,118 4,363 3,896 Cash Flow from Operating Activities Investing Activities: (1,384) (1,306) 291 $(2,399) Fixed Assets Acquired, Net (Acquisition) Sale of Businesses, Net (Purchase) Sale of Investments (1,319) 358 321 (662) $(1,460) 406) Cash Flow from Investing Activities Financing Activities: $(1,367) 361 676 882 253 (1,820) (1,376) $(2,061) S 375 1,072 S 1,447 S 51 S 122 Increase (Decrease) in Short-Term Borrowing Increase (Decrease) in Long-Term Debt Increase (Decrease) in Common Stock Dividends Paid (1,405) (1,398) $(1,766) (1,222) 2,444 (2,389) (1,380) $(2,547) Cash Flow from Financing Activities Net Increase (Decrease) in Cash & Equivalents(47) Cash at Beginning of Year Cash at End of Year Interest Income Interest Expense 1,896 1,849 $ 105 215 $ 449 S 1,447 $ 1,896 $ 132 $ 210