Question: Cailor Co. was constructing a new corporate headquarters that qualified for interest capitalization. Cailor had the following outstanding debt issuances during the entire year of

Cailor Co. was constructing a new corporate headquarters that qualified for interest capitalization. Cailor had the following outstanding debt issuances during the entire year of construction: $4,000,000 face value, 7% interest $7,000,000 face value, 6% interest None of the borrowings were specified for the construction of the qualified fixed asset. Average expenditures for the year were $5,000,000. What interest rate should Cailor use to calculate capitalized interest on the construction?

a) 7.0% b) 6.0% c) 6.5% d) 6.4%

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