On January 1, 20X0 Wayne Defense Entity (WDE) Borrows $3,000,000

On January 1, 20X0 Wayne Defense Entity (WDE) borrows $3,000,000 to build a new qualifying asset. The terms of the agreement are that the entire loan amount will be paid exactly one year from the borrowing date. Additionally, the borrowed funds include an 8 percent interest payment at the time of repayment. One third of the borrowed funds were used for the asset. Before the funds were used for construction, all funds were invested and yielded a 5 percent return. All funds were initially borrowed specifically for this project. The firm has no other outstanding borrowings. Ignore time value of money. What amount of the borrowing cost should be capitalized?

A) $30,000
B) $50,000
C) $80,000
D) $90,000
E) $110,000
F) $150,000
G) $240,000