Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 18

A couple planning for their child's college educa­tion can fund part of or all the expected $100,000 tuition cost from their own funds (through an edu­cation IRA) or borrow all or part of it. The average return for their own funds is 7% per year, but the loan is expected to have a higher interest rate as the loan amount increases. Use a spreadsheet to generate a plot of the WACC curve with the esti­mated loan interest rates below and determine the best D-E mix for the couple.