IntCap - Aug-Oct 10%, 12%construction debt Nov1-Nov30 10%...

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1/1/2003 $200,000 5/1/2003 $400,000 9/1/2003 $600,000 12/31/2003 $900,000 10-year $500,000 10% construction debt issued 6/30/2003 5-year $300,000 12% debt was issued on 10/31/1998 3-month 8% 400,000 notes payable issued on 5/1/2003 Construction began on 3/1/2003 and was substantially complete on 11/30/2003. For modified method, assume all general debt is outstanding throughout the year Book method Capitalization period: March-Nov WAAE 1/1 200,000*9/12 5/1 400,000*7/12 9/1 600,000*3/12 WAAE = 533,333 Actual interest paid during capitalization period 500,000*10%*5/12 + 300,000*12%*8/12 + 400,000*8%*3/12 = 52,833 Mar-Apr 12% debt May-June 12% debt, 8% debt July 12% debt, 8% debt, 10% construction debt
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Unformatted text preview: Aug-Oct 10%, 12%construction debt Nov1-Nov30 10% construction debt Average rate on general debt = (300,000*12%*9/12 + 400,000*8%*3/12) / (300,000*9/12 + 400,000*3/12) = 35,000/325,000 = 10.77% Avoidable Interest= Mar-Apr 300,000*12%*2/12 May-June 533,333*10.77%*2/12 July 500,000*10%*1/12 + 33,333*10.77%*1/12 Aug-Oct 500,000*10%*3/12 + 33,333*12%*3/12 Nov 500,000*10%*1/12 Modified method Average rate on general debt = (300,000*12%*9/12 + 400,000*8%*9/12) / (300,000*9/12 + 400,000*9/12) = 9.71% 1/1 200,000 9/12 0.0971 14565 5/1 400,000 7/12 0.0971 22656 9/1 500,000 3/12 0.10 12500 9/1 100000 3/12 0.0971 2427...
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This homework help was uploaded on 04/21/2008 for the course ACG 4133c taught by Professor Ajinka during the Spring '08 term at University of Florida.

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IntCap - Aug-Oct 10%, 12%construction debt Nov1-Nov30 10%...

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