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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 $13.5 billion in annue sales worldwide, partially finances its operation through the issuance of debt. At the beginning of its 2015 fiscal year, it had $6.7 billion in total debt. At the end of fiscal year 2015 , its total debt ha increased to $6.8 billion. Its fiscal 2015 interest expense was $418 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: 0.0345=3.5%). % 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: 0.0345=3.5% ). %