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27 March, 07:18

Acme Supply Co. has a new project that will require the company to borrow $3,000,000. Acme has made an agreement with three lenders for the needed financing. First National Bank will give $1,500,000 and wants 10% interest on the loan. Lockup Bank will give $1,000,000 and wants 12% interest on the loan. Southern National Bank will give $500,000 and wants 13% interest on the loan. What is the weighted average cost of capital for this $3,000,000?

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  1. 27 March, 07:44
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    WACC = 10 (1,500,000/3,000,000) + 12 (1,000,000/3,000,000) + 13 (500,000/3,000,000)

    WACC = 5 + 4 + 2.17

    WACC = 11.17%

    Explanation:

    WACC is a function of interest charged by each bank and the proportion of funds provided by each bank in relation to the total amount required by the investor.
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Home » Business » Acme Supply Co. has a new project that will require the company to borrow $3,000,000. Acme has made an agreement with three lenders for the needed financing. First National Bank will give $1,500,000 and wants 10% interest on the loan.
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