Question
Question text Estimating the Weighted Average Cost of Capital Kellogg Company manufactures cereal and other convenience food under its many well-known brands such as Kelloggs,
Question text Estimating the Weighted Average Cost of Capital Kellogg Company manufactures cereal and other convenience food under its many well-known brands such as Kelloggs, 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 0.40. Assume that the expected risk-free rate is 2.5% and the expected market premium is 5%. Kelloggs stock closed at $50.12 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
. b. Compute Kelloggs WACC. Use your rounded answer above for computation. Round answer to one decimal place (ex: 0.0245 = 2.5%).
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