E12-27. Estimating the Cost of Debt Capital billion. Its fiscal 2015 interest expense was $198 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: 0.0345=3.5% ). % 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=3.5% ). % billion. Its fiscal 2015 interest expense was $227 million, and its assumed statutory tax rate was 37%. Kellogg has an estimated market beta of 0.30 . Assume that the expected risk-free rate is 2.5% and the expected market premium is 5%. a. What does Kellogg's market beta imply about its stock returns? A beta of 0.30 indicates Kellogg's stock is less volatile than the market index. A beta of 0.30 indicates Kellogg's stock is more volatile than the market index. beta of 0.30 indicates Kellogg's stock moves perfectly with the market index. b. Estimate Kellogg's cost of equity capital. Round answer to one decimal place (ex: 0.0245=2.5% ). % Estimating the Weighted Average Cost of Capital expected market premium is 5%. Kellogg's stock closed at $72.27 on December 31,2015 . On that same date, the company had 420,315,589 shares issued, of which 70,291,514 shares were in treasury. a. What is Kellogg's total market capitalization as of December 31, 2015? Enter answer in billions, rounding to one decimal place. $ billion b. Compute Kellogg's WACC. Use your rounded answer above for computation. Round answer to one decimal place (ex: 0.0245=2.5% ). \%