Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Estimating the Weighted Average Cost of Capital Kellogg Company manufactures cereal and other convenience food under its many well- known brands such as Kellogg's, Keebler,

image text in transcribed
Estimating the Weighted Average Cost of Capital Kellogg Company manufactures cereal and other convenience food under its many well- known brands such as Kellogg's, Keebler, and Cheez-It. 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 $6.5 billion in total debt. At the end of fiscal year 2015, its total debt had increased to $6.6 billion. Its fiscal 2015 interest expense was $227 million, and its assumed statutory tax rate was 37%. Kellogg has an estimated market beta of 0.50. Assume that the expected risk-free rate is 2.5% and the 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. $ 0 billion b. Compute Kellogg's WACC. Use your rounded answer above for computation. Round answer to one decimal place (ex: 0.0245 = 2.596). 0 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions