Question: The Kit Company borrows 5 million at 12 on January

The Kit Company borrows $5 million at 12% on January 1, 2010 specifically for the purpose of financing a construction project. The company invests the total amount at 11% until it makes payments for the construction project. During the first year of construction, the company incurs construction costs of $4 million evenly over the year.

Compute the amount of interest that the company would capitalize and the amount of interest revenue it would recognize.

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  • CreatedDecember 09, 2013
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