Genetech has $4,000,000 in assets, have decided to finance 30% with long-term financing (9% rate) and 70% with short-term financing (7%) rate. What will be their annual interest costs?

Question

Quizplus · Accepted Answer

The annual interest cost is calculated by finding the interest for both long-term and short-term financing and summing them up. Long-term financing: $4,000,000 * 30% * 9% = $108,000. Short-term financing: $4,000,000 * 70% * 7% = $196,000. Total interest cost = $108,000 + $196,000 = $304,000.

Genetech Has $4,000,000 in Assets, Have Decided to Finance 30