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?

BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937
BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937

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Chapter
Section
Chapter 10, Problem 2DQ
Textbook Problem

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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Chapter 10 Solutions

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

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