Quetion $1$ Not complete

Marked out of $2\mathrm{.}00$

Aige question

E$12-27.$ Estimating the Cost of Debt 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{.}4$ billion in 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 $($ec$.0\mathrm{.}0345=3\mathrm{.}5\%).$

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