You have a project that costs 400 upfront, and will spin off 150 annually for the next 4 years

To calculate NPV, we must know WACC.

To find WACC, we need to know A) cost of debt and B) cost of equity)

Let’s say you want to raise money and keep a target capital ratio of 50% debt, 50% common equity

**The float rate is 4.5%**

It is given that cost of debt is 4.225%, but you have to solve for cost of equity now, which brings me back to the float rate.

Does the float rate mean that it costs 4500 for access to 100,000, for a total cost of 104,500? Or does it mean that the total cost is 100,000, so you’re paying 4500 for access to the $95,500 left over?