Question

Genetech has $4,000,000 in assets. It has decided to finance 30% with long-term financing (9% rate) and 70% with short-term financing (7%) rate. What will be its annual interest costs?

Answer 1

Answer:

$304,000  annual interest costs

Explanation:

• 30% of 4.000.000 = 1.200.000
• 70% of 4.000.000 = 2.800.000
• 1.200.000*0.09 + 2.800.000*0.07 = 0.108 + 0.196 = 0.034 Millions

In other words

$304,000

30% of 4million= 1.2m

70% of 4m = 2.8m

(1.2m*0.09) +( 2.8m*0.07 )= 0.304m or $304000