Estimating Market and Book Values and Cost of Capital Measures

The December 31, 2015, partial balance sheet of 3M Company follows ($ millions, except per share amounts). YCharts. com reported that the total market capitalization of 3M was $94.14 billion and its stock price was $152.89 as of December 31, 2015. Also, YCharts. com estimates its total enterprise value at $103.67 billion, and its market beta at 1.17. 3M’s average pretax borrowing cost is 1.4%, and its assumed statutory tax rate is 37%. Assume that the risk-free rate equals 2.5% and the market premium equals 5%.

Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt $ 2,044
Accounts payable 1,694
Accrued payroll 644
Accrued income taxes 332
Other current liabilities 2,404
Total current liabilities 7,118
Long-term debt 8,753
Pension and post-retirement benefits 3,520
Other liabilities 1,580
Total liabilities 20,971
Equity
3M Company shareholders' equity:
Common stock, par value $0.01 per share
Shares outstanding-2015: 609,330,124 $ 9
Additional paid-in capital 4,791
Retained earnings 36,575
Treasury stock (23,308)
Accumulated other comprehensive income (loss) (6,359)
Total 3M Company shareholders' equity 11,708
Noncontrolling interest 39
Total equity $11,747
Total liabilities and equity $32,718
(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, 2015.
$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, 2015.
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%