Other

Question 1

Debt Restructure

Answer 1

Interest on Debt Restructure is P.V. of newly issued debt x’s ORIGINAL interest rate

Question 2

Avg Accum Expenditure

Answer 2

Time value is used.
*Pay attention to when project is started. For example, if it’s starts in April then you weigh the payments out of a total of 9 months.
Int rate x’s AAE equals capitalizable interest.

Question 3

Interest Capitalization

Answer 3

Full amount of Avg Accum Expend.

If your debt is less than AAE, you need to weight the remainder by dividing the interest exp for each remaining debt divided by the total amount borrowed of each remaining debt multiplied by the remaining dollars in AAE.

**Don’t forget, the Capitalized interest increases the basis of the asset.

Two methods: Weighted Avg and regular
*Only difference is the Weighted Avg includes the FULL AMOUNT of specific borrowing on a project in the interest capitalization calculation