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 $3,$ and Cheez$-$lt$3.$ The company, with over $$13\mathrm{.}5$ billion in annual sales

billion. Its fiscal $2015$ interest expense was $$227$ million, and its assumed statutory tax rate was $37\%.$ Kellogg has an estimated market beta of $0\mathrm{.}70.$ Assume that the expected risk$-$free rate is $2\mathrm{.}5\%$ and the

expected market premium is $5\%.$

Kellogg's stock closed at $$80\mathrm{.}19$ 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: $0\mathrm{.}0245=2\mathrm{.}5\%).$

$6$