Question : Calculate the cost of FVW$\text{'}$s current debt and the overall cost of debt for FVW as a weighted average cost of capital $($WACC$)$ considering both current and non$-$current debt. Clearly explain your assumptions, method, and calculations.

EXtra info:

In order to estimate FVW$$s cost of debt, you need to calculate a weighted average of its cost of current

debt and its cost of non$-$current debt. The cost of non$-$current debt is just the yield on the on the bond

described above, so you need to figure out the cost of current debt. You begin by observing that FVW

paid $$698,000$ in interest in $2023.$ When you look at the balance sheet, you note that the only liabilities

that charge interest are short$-$term loans $($part of current liabilities$)$ and long$-$term debt $($part of non$-$

current liabilities$).$ Since long$-$term debt is the above$-$mentioned bond, if you subtract its annual coupon

for $2023$ from the total amount of interest paid during the year, you will obtain the amount of interest

FVW paid on its short$-$terms loans. You decide to convert this amount into an interest rate and use it

as the cost of current debt.

The worksheet Question $2$ provides a space for you to estimate FVW$$s cost of current debt. Estimate

its overall cost of debt as a weighted average of the costs of its current and non$-$current debt. State the

value in your report and explain how you obtained it$.$ Be sure to explain how you derived the weights

that were used to calculate the weighted average above$\backslash$table$[[$F Fern Valley Wines Balance Sheet$],[($All amounts in $$000),2023],[$Cash$,4,477],[$Accounts receivable,$5,619],[$Inventory$,9,555],[$Other current assets,$473],[$Total current assets,$20,124],[$Inventory$,10,689],[$Proprty$,$ plant and equipment,$14,955],[$Right$-$of$-$use assets,$4,388],[$Agricultural assets,$327],[$Intangible assets,$12,988],[$Deferred tax assets,$1,641],[$Other non$-$current assets,$571],[$Total non$-$current assets,$45,559],[$Total assets,$65,683],[$Accounts payable,$7,489],[$Current tax liabilities,$850],[$Provisions$,760],[$Short$-$term loans,$1,098],[$Other current liabilities,$99],[$Total current liabilities,$10,296],[$Long$-$term debt,$15,009],[$Deferred tax liabilities,$3,424],[$Other non$-$current liabilities,$210],[$Total non$-$current liabilities,$18,643],[$Total liabilities,$28,939],[$Contributed equity,$34,912],[$Accumulated retained earnings,$1,832],[$Total equity,$36,744]]$