AuthorTopic: Question on FSA 3
@2006-10-26 20:26:41
Acorn Construction Company is financing construction of a building with $10,000,000 of debt, $8,000,000 of which is a construction loan directly on the building. The remainder is financed out of the general debt of the company. When construction is completed, the facility will be used by the company. The debt structure of the firm is:

Construction Loan @ 10% $ 8,000,000
Long-Term Debt @ 8% $12,000,000
Long-Term Debt @ 11% $ 2,000,000

The interest payable during the year is:

a. 1,960,000
b. 1,980,000
c. 2,180,000
d. 2,420,000

My question is : Does this imply the interest payable on the construction project during the year or the total interest payable by the company during the year? How do we interpret this?

CFA Discussion Topic: Question on FSA 3

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