Jamie\'s Cupcakes has a new project that will require the company to borrow $3,0

Question

Jamie's Cupcakes has a new project that will require the company to borrow $3,000,000. Jamie has made an agreement with three lenders for the needed financing. Bank 1 will give $1,250,000 and wants 11% interest on the loan. Bank 2 will give $1,500,000 and wants 13% interest on the loan. The final part of the loan comes from a guy she knows  will give $250,000 and wants 19% interest on the loan. What is the weighted average cost of capital for this $3,000,000? Jamie's Cupcakes has a new project that will require the company to borrow $3,000,000. Jamie has made an agreement with three lenders for the needed financing. Bank 1 will give $1,250,000 and wants 11% interest on the loan. Bank 2 will give $1,500,000 and wants 13% interest on the loan. The final part of the loan comes from a guy she knows  will give $250,000 and wants 19% interest on the loan. What is the weighted average cost of capital for this $3,000,000? Jamie's Cupcakes has a new project that will require the company to borrow $3,000,000. Jamie has made an agreement with three lenders for the needed financing. Bank 1 will give $1,250,000 and wants 11% interest on the loan. Bank 2 will give $1,500,000 and wants 13% interest on the loan. The final part of the loan comes from a guy she knows  will give $250,000 and wants 19% interest on the loan. What is the weighted average cost of capital for this $3,000,000?

Explanation / Answer

WACC= (1250000/3000000) * 11% + (1500000/3000000) * 13%+   (250000/3000000) * 19%

=12.67%

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