Refer to the information in RE10- 8 and RE10- 9. Assume that Dexter borrowed $ 1 million specifically for the project by issuing a 10%, 5- year, $ 1 million note (instead of borrowing $ 2.5 million as stated in RE10- 8). Calculate Dexter’s capitalized interest on the student condominium complex in Year 1.
In RE10-8
Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed $ 2.5 million on January 1 specifically for the project by issuing a 10%, 5- year, $ 2.5 million note, which is payable on December 31 of Year 3. Dexter also had a 12%, 5- year, $ 3 million note payable and a 10%, 10- year, $ 1.8 million note payable outstanding all year. Calculate the weighted average interest rate on the non- construction- specific debt for Year 1.
In RE10-9
January 1.......... $ 300,000
March 1............ 600,000
June 30............. 1,000,000
November 1........... 480,000