Question $1$ Incorrect Mark $0\mathrm{.}00$ out of $2\mathrm{.}00$ p Flag question

E$12-27.$ Estimating the Cost of Debt Capital

total debt. At the end of fiscal year $2015,$ its total debt had increased to $$6\mathrm{.}5$ billion. Its fiscal $2015$ interest expense was $$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: $0\mathrm{.}0345=3\mathrm{.}5\%).$

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: $0\mathrm{.}0345=3\mathrm{.}5\%).$

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