Dawn is preparing a home office to perform sub-contract projects for midsized architect firms. She plans to use $15,000 of her own funds which currently generate a return of 4% per year. The remainder of the financing will be provided by a $10,000 bank loan carrying a 9% per year interest rate. She hopes to realize a return of 3% above the average cost of capital to establish her office, and she realizes that the factors of inflation and risk should also be considered. Her decision is to add another 2% per year to compensate for these elements. What is the MARR she should use when uating projects?
Fraction of Equity = 15000/2500 =
Fraction of Debt = 10000/2500 =
WACC=
MARR=