Acme Supply Co. has a new project that will require the company to bor

Acme Supply Co. has a new project that will require the company to borrow $3,000,000. Acme has made an agreement with three lenders for the needed financing.

First National Bank will give $1,500,000 and wants 10% interest on the loan. Lockup Bank will give $1,000,000 and wants 12% interest on the loan. Southern National Bank will give $500,000 and wants 13% interest on the loan. What is the weighted average cost of capital for this $3,000,000?
A) 10.55%
B) 11.17%
C) 11.66%
D) 12.16%

ANSWER

Answer: B
Explanation: B) WACC = × 10% + × 12% + × 13% = 11.17%.