An SPV borrowed money $400 million, which represent 80% of the total money needed for the...

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An SPV borrowed money $400 million, which represent 80% of the total money needed for the project, from a syndicate of banks to finance the construction of a power station. The money was borrowed at interest rate of 3% per year (compound). The money was borrowed to be returned in installments when the project starts operating for 20 years. The rest of the needed money was financed at an interest rate of 7% per year for the same pay back conditions as the first amount. Calculate the average cost of capital. An SPV borrowed money $400 million, which represent 80% of the total money needed for the project, from a syndicate of banks to finance the construction of a power station. The money was borrowed at interest rate of 3% per year (compound). The money was borrowed to be returned in installments when the project starts operating for 20 years. The rest of the needed money was financed at an interest rate of 7% per year for the same pay back conditions as the first amount. Calculate the average cost of capital.

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To calculate the average cost of capital we need to calculate the weighted average cost of capital WACC which takes into account the different sources ... View the full answer