Grade 3.33 dut of 10.00 (33%) QUESTION 1 Partially correct Mark 1,67 out of 333...
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Grade 3.33 dut of 10.00 (33%) QUESTION 1 Partially correct Mark 1,67 out of 333 PFlag question Estimating the Cost of Debt Capital Kellogg Company manufactures cereal and other convenience food under its many well-known brands such as Kellogg's, Keebler, and Cheez-lt. The company, with over $13.5 billion in annual sales worldwide, partially finances its operation through the issuance of debt. At the beginning of its 2015 fiscal year, it had $6.3 billion in total debt. At the end of fiscal year 2015, its total debt had increased to $6.4 billion. Its fiscal 2015 interest expense was $187 million, and its assumed statutory tax rate was 37%. a. Compute the company's average pretax borrowing cost. (Hint: Use the average amount of debt as the denominator in the computation.) Round your answer to one decimal place (ex: 00345-3.5%). 2.8 % b. Assume that the book value of its debt equals its market value. Then, estimate the company's cost of debt capital. Round your answer to one decimal place (ex: 0.0345-3.596)
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