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Weighted average capitalisation rate

ASalawi sayed5y ago
Hello Sir, In Kaplan attempt to answer the following question of capitalised cost of borrowing in the this way Weighted average capitalisation rate = (9% × 15 / 39) + (11% × 24 / 39) = 3.5% + 6.8% = 10.3% $ Borrowing costs = $6m × 10.3% × 9/12 463,500 + $2m × 10.3% × 5/12 85,833 = 549,333 But according to the lectures seems to be more logical was as in this way 15 X 9% = $1.35 24 x 11%= $ 2.64 total = $ 3.99 then ($3.99 / 39)x100 = 10.23% $6mx10.23%x9/12 = $ 460350 $2mx10.23%x5/12 = $ 85250 total interest = $ 545600 So by this way we will have slight difference than the kaplan way because of the difference in the weighted average capitalisation rate which way we have to use? Thanks, Carriageways Co had the following bank loans outstanding during the whole of 20X8 which form the company's general borrowings for the year: $m 9% loan repayable 20X9 15 11% loan repayable 20Y2 24 Carriageways Co began construction of a qualifying asset on 1 April 20X8 and withdrew funds of $6 million on that date to fund construction. On 1 August 20X8 an additional $2 million was withdrawn for the same purpose. Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 December 20X8. A $549,333 B $411,999 C $750,000 D $350,000
P2-D2P2-D2Tutor5y ago#1
Hi, If you look at their calculations then they have rounded the figures to 3.5% (3.46153846%) and 6.8% (6.76923077%), hence the differences. Add the numbers in brackets together and you will get your 10.23%. Thanks
ASalawi sayed5y ago#2
Thanks.
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