Sam Jones Has an Engineering Firm

question 62

Multiple Choice

Sam Jones has an engineering firm. He wants to build a new headquarters building. The building will cost $1,500,000. He will put down $1,050,000 and have a bank finance the remainder at prime plus 2 percent. The prime lending rate is currently 8.5 percent. Sam will withdraw the money for the down payment from his mutual fund account where he has earned 13 percent for the last ten years. What is Sam's weighted average cost of capital?

• A) 10.5%
• B) 11.25%
• C) 8.5%
• D) 12.25%

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Definitions:

Moratorium

A temporary halt or suspension of an activity or law, usually by government decree.

Earmarks

Provisions added to legislation that allocate specific funds for particular projects, usually at the behest of a legislator to benefit their own constituents or interests.

Term Limits

Restrictions on the number of terms or the length of time a person can hold a particular elected office.

Interest Groups

Organizations that seek to influence public policy in favor of their specific interests without seeking political office.