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Sunland Company is constructing a building
Sunland Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6300000 on March 1, $5340000 on June 1, and $8950000 on December 31. Sunland Company borrowed $3180000 on January 1 on a 5-year, 11% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 3-year, $6420000 note payable and an 10%, 4-year, $12150000 note payable.
What is the weighted-average interest rate used for interest capitalization purposes?
| 9.65% |
| 9.50% |
| 10.00% |
| 9.85% |
Expert Solution
Answer:-
Explanation:-
Weighted average interest rate
= [(6420000×9% + 12150000×10%)] / (6420000 + 12150000)
= 1792800 / 18570000
= 9.65%
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