P9–18 Weighted average cost of capital John Dough has just been awarded his degree in business. He has three education loans outstanding. They all mature in 5 years and can be repaid without penalty any time before maturity. The amounts owed on each loan and the annual interest rate associated with each loan are given in the following table.

John can also combine the total of his three debts (that is, $64,000) and create a consolidated loan from his bank. His bank will charge a 7.2% annual interest rate for a period of 5 years.
Should John do nothing (leave the three individual loans as is) or create a consolidated loan (the $64,000 question)?

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Annual Loan Balance due Balance due interest rate 1 $20,000 6% 23 12,000 9 3 32,000 S