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 annual sales worldwide, partially finances its operation through the issuance of debt. At the beginning of its 2015 fiscal year, it had $6.2 billion in total debt. At the end of fiscal year 2015, its total debt had increased to $6.3 billion. Its fiscal 2015 interest expense was $266 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%). Answer% 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%). Answer%

In 2016, the Allen corporation had sales of $63 million, total assets of $44 million, and total liabilities of $15 million. The interest rate on the company’s debt is 5.7 percent, and it’s tax rate is 35 percent. The operating profit margin is 14 percent. A. Compute the firm’s 2016 net operating income and net income The firm’s 2016 net operating income is Round to two decimal places.

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016, the Allen Corporation had sales of $63 million, total assets of $40 million, and total liabilities of $23 million. The interest rate on the company's debt is 5.7 percent, and its tax rate is 35 percent. The operating profit margin is 14 percent. a. Compute the firm's 2016 net operating income and net income. b. Calculate the firm's operating return on assets and return on equity. (Hint: You can assume that interest must be paid on all of the firm's liabilities.) a. Compute the firm's 2016 net operating income and net income. The firm's 2016 net operating income is $8.82 million. (Round to two decimal places.) The firm's 2016 net income is $ million. (Round to two decimal places.) (---))

Long-Term Financing Needed At year-end 2018, Wallace Landscaping's total assets were $2.37 million, and its accounts payable were $360,000. Sales, which in 2018 were $2.1 million, are expected to increase by 10% in 2019. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $640,000 in 2018, and retained earnings were $345,000. Wallace has arranged to sell $90,000 of new common stock in 2019 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt the end of 2019. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 5%, and 45% of earnings will be paid out as dividends. a. What was Wallace's total long-term debt in 2018? Do not round intermediate calculations. Round your answer to the…