On January 1, 2020, the Magic Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on October 31, 2021. The firm incurred $1,800,000 and 1,675,000 expenditures in 2020 and 2021, respectively. On January 1, 2020, the company obtained a $2 million construction loan with a 9% interest rate. The loan was outstanding all of 2020 and 2021. The company's other interest-bearing debt included a long-term note of $4,000,000 with a 6% interest rate, payable annually on Dec 31. Finally, the firm also had a 3-year long-term non-interest-bearing note. The note requires the payment of $600,000 on Dec 31, 2021. On January1, 2019, the present value of the future cash flows on the note was $481,800 (Hint: calculate an implied interest rate). Both notes were outstanding during all of 2020 and 2021. Interest is paid annually on all debt. The company's fiscal year-end is December 31. Required: 1. (1 point) What is the interest rate if the specific interest method is used? 2. (1 point) What is the interest rate if the weighted average method is used? 3. Find the initial valuation of the building assuming that: a. (2 points) Expenditures were incurred evenly throughout the year and Magic Manufacturing uses the specific interest method. b. (2 points) Expenditures were incurred beginning of each year and Magic Manufacturing uses the weighted average method. C. (4 points) Expenditures were incurred at the following times during the year and Magic Manufacturing uses the specific interest method: Date Expenditures 1/1/2020 1,100,000 3/1/2020 120,000 6/30/2020 550,000 10/1/2020 30,000 1/31/2021 400,000 4/30/2021 375,000 8/31/2021 900,000 4. (2 points) What is the interest expense reported in the I/S for 2021? On January 1, 2020, the Magic Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on October 31, 2021. The firm incurred $1,800,000 and 1,675,000 expenditures in 2020 and 2021, respectively. On January 1, 2020, the company obtained a $2 million construction loan with a 9% interest rate. The loan was outstanding all of 2020 and 2021. The company's other interest-bearing debt included a long-term note of $4,000,000 with a 6% interest rate, payable annually on Dec 31. Finally, the firm also had a 3-year long-term non-interest-bearing note. The note requires the payment of $600,000 on Dec 31, 2021. On January1, 2019, the present value of the future cash flows on the note was $481,800 (Hint: calculate an implied interest rate). Both notes were outstanding during all of 2020 and 2021. Interest is paid annually on all debt. The company's fiscal year-end is December 31. Required: 1. (1 point) What is the interest rate if the specific interest method is used? 2. (1 point) What is the interest rate if the weighted average method is used? 3. Find the initial valuation of the building assuming that: a. (2 points) Expenditures were incurred evenly throughout the year and Magic Manufacturing uses the specific interest method. b. (2 points) Expenditures were incurred beginning of each year and Magic Manufacturing uses the weighted average method. C. (4 points) Expenditures were incurred at the following times during the year and Magic Manufacturing uses the specific interest method: Date Expenditures 1/1/2020 1,100,000 3/1/2020 120,000 6/30/2020 550,000 10/1/2020 30,000 1/31/2021 400,000 4/30/2021 375,000 8/31/2021 900,000 4. (2 points) What is the interest expense reported in the I/S for 2021