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soldi70 [24.7K]
3 years ago
13

Waterway Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures wer

e $1,992,000 on March 1, $1,272,000 on June 1, and $3,020,740 on December 31. Waterway Company borrowed $1,012,250 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,458,400 note payable and an 10%, 4-year, $3,504,400 note payable. Compute the weighted-average interest rate used for interest capitalization purposes.
Business
1 answer:
USPshnik [31]3 years ago
8 0

Answer:

9.59%

Explanation:

The computation of the weighted-average interest rate used for interest capitalization purposes is shown below:

<u>Particulars                               Amount           Interest  </u>

9%, 5-year note payable      $2,458,400       $221,256  

10%, 4-year note payable      $3,504,400      $350,440  

Total                                        $5,962,800      $571,696  

So, Weighted-average interest rate is

= $571,696 ÷ $5,962,800

= 9.59%

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