BAURU, S.A., a Brazilian 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 2009

Amount borrowed

500 million Brazilian real (BRL)

Annual interest rate

14 percent

Term of the loan

3 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 two years, during which time BAURU earned BRL 10 million by temporarily investing the loan proceeds. Which of the following is the amount of interest related to the plant construction (in BRL million) that can be capitalized in BAURU’s balance sheet?

A. 130

B. 140

C. 210