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Question: Weighted Average Cost of Capital Ren and Stimpy are considering buying a 5-acre farm at a cost of $875,000. They have a combined
Question: Weighted Average Cost of Capital Ren and Stimpy are considering buying a 5-acre farm at a cost of $875,000. They have a combined savings of $250,000, and the bank approved a $400,000 first mortgage. Stimpy's father agreed to provide them with a $100,000 loan. Also, Ren recently won $125,000 in a lottery. If Ren and Stimpy invested their money, they could earn 3.5%. TD Canada Trust has offered an interest rate of 5.54% on the first mortgage. Stimpy's father agreed to lend the money at a rate of 4.0%. Required: Calculate Ren and Stimpy's weighted average cost of capital. Show your calculations. Round to 2 decimal places. Solution:
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