Interest rate for analyzing capital projects

Reference no: EM13289138

A public university wants to apply the concept of the WACC to developing its interest rate for analyzing capital projects. It has an endowment of $68 million which is earning 6.3% interest. It is paying 4.5% interest on $29 million in bonds. It believes that $94 million in general funds from the taxpayers should be assigned an interest rate of 13%. What is the university’s cost of capital? Note that only the interest on the endowment is available to fund capital projects.

Reference no: EM13289138

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