Kellogg Company, with more than $13.5 billion in annual sales worldwide, partially finances its operation through the issuance of debt. At the start of its 2015 fiscal year, it had a total debt of $6.5 billion. At the end of the 2015 fiscal year, its total debt had risen to $6.6 billion. Its interest expense in fiscal 2015 was $227 million and its assumed statutory tax rate was 37%.

to. Calculate the company's average cost of borrowing before taxes. (Hint: Use the average amount of debt as the denominator in the calculation.) Round your answer to one decimal place.

b. Assume that the book value of your debt is equal to its market value. Next, calculate the company's cost of debt capital. Round your answer to one decimal.

Answer rating: 100% (QA)

a The companys average cost of borrowing befor... View the full answer