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What would be the amount of interest related to the plant

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Reference no: EM132532198

Question - Zesta Corporation borrows capital from a local bank to finance the construction of its manufacturing plant. The loan has the following conditions:

Borrowing date 1 January 2019

Amount borrowed $1000 million

Annual interest rate 13 %

Term of the loan 6 years

Payment method: Annual payment of interest only. Principal amortization is due at the end of the loan term.

The construction of the plant takes four years, during which time Zesta earned $75 million by temporarily investing the loan proceeds. What would be the amount of interest related to the plant construction (in million $) that can be capitalized in Zesta's balance sheet?

Reference no: EM132532198

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