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 $$13\mathrm{.}5$ billion in annual sales worldwide, partially finances its operation through the issuance of debt. At the beginning of its $2015$ fiscal year, it had $$6\mathrm{.}5$ billion in total debt. At the end of fiscal year $2015,$ its total debt had increased to $$6\mathrm{.}6$ billion. Its fiscal $2015$ interest expense was $$227$ million, and its assumed statutory tax rate was $37\%.$ Kellogg has an estimated market beta of $0\mathrm{.}40.$ Assume that the expected risk$-$free rate is $2\mathrm{.}5\%$ and the expected market premium is $5\%.$

Kellogg's stock closed at $$50\mathrm{.}12$ 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: $0\mathrm{.}0245=2\mathrm{.}5\%).$

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