Suppose we are trying to calculate Minnesota Mining & Manufacturing\'s (MMM) WAC

Question

Suppose we are trying to calculate Minnesota Mining & Manufacturing's (MMM) WACC. As a first step, we need to estimate what percentage of MMM's capital comes from debt, preferred stock, and common equity, respectively. Go to finance.yahoo.com. Enter 3M's ticker symbol "MMM" in the “Quote Lookup” box and click “Look Up”. You will be directed to that stock’s summary page. Find "Market Cap", which is the market value of 3M's common equity. Then click "Balance Sheet" under "Financials" in the very left column. Find the "long-term debt" for year 2015. Note that the numbers are in thousands. Using its long-term debt value from the balance sheet and market capitalization, calculate firm's debt and common equity weights to be used in the WACC equation. Here we are assuming market value and book value of debt are the same, and we are ignoring short-term debt for simplicity. Which of the following is the closest to your calculation of the weight of common equity using the info above?

79.82%

83.99%

89.67%

92.11%

98.28%

Explanation / Answer

3M company Details Amt $ a Market Capitalization equity            102,100,000,000 b Long term debt                 8,753,000,000 c Total Capital employed            110,853,000,000 d Weight of common equity =a/c= 92.10% So correct option is 92.11% approx

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