Need help with the illustration of net borrowing cost on pg 26 lecture notes

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October 14, 2020 at 5:06 pm #588899
farhaanm
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I am confused with the illustration in example 5. Why is the 0.2 million substrated from the 1.5 million. Also how was the interest income calculated?
October 17, 2020 at 8:07 am #589433
P2-D2
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Hi,

The net borrowing costs are capitalised. So, we have incurred 1.5 million of costs but also earned 0.2 million of income on money deposited.

The interest income will be the $20 million invested for one month at 4%.

Thanks
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