- This topic has 2 replies, 2 voices, and was last updated 3 years ago by
.
Viewing 3 posts - 1 through 3 (of 3 total)
- Posts
A company has a loan of $60,000 and will pay interest on the loan of 10% per annum in perpetuity. The company has a cost of capital of 5%.
The present value of the interest on the loan is $?
(60000×10%)/5=120000
Why it is using two cost of capital? If 5% is cost of capital so what is 10% for?The loan might be only a small part of the company’s capital.
It is a bit like you having a mortgage loan of $100,000 on which you are charged 4% and a credit card balance of $100 on which you are charged 20%.
Viewing 3 posts - 1 through 3 (of 3 total)
- The topic ‘Kit’ is closed to new replies.