Once again we can use the CAPM to estimate MMM’s cost of equity. From the Internet, you can find a number of different sources for estimates of beta—select the measure that you think is best, and combine this with your estimates of the risk-free rate and the market risk premium to obtain an estimate of its cost of equity. (See the Taking a Closer Look problem in Chapter 8 for more details.) What is your estimate for MMM’s cost of equity? Why might it not make much sense to use the DCF approach to estimate MMM’s cost of equity?
Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
Solutions
Once again we can use the CAPM to estimate MMM’s cost of equity. From the Internet, you can find a number of different sources for estimates of beta—select the measure that you think is best, and combine this with your estimates of the risk-free rate and the market risk premium to obtain an estimate of its cost of equity. (See the Taking a Closer Look problem in Chapter 8 for more details.) What is your estimate for MMM’s cost of equity? Why might it not make much sense to use the DCF approach to estimate MMM’s cost of equity?
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