A couple planning for their child's college education can fund part of or all the expected $100,000 tuition cost from their own funds (through an education IRA) or borrow all or part of it. The average return for their own funds is 7% per year, but the loan is expected to have a higher interest rate as the loan amount increases. Use a spreadsheet to generate a plot of the WACC curve with the estimated loan interest rates below and determine the best D-E mix for the couple.
Loan Amount, $ Interest Rate, % per year
10,000 .......... 5.0
30,000 .......... 6.0
50,000 .......... 8.0
60,000 .......... 9.0
75,000 .......... 11.0
100,000 ......... 13.0