6. Marginal Cost of Capital Structure

k. describe the marginal cost of capital schedule, explain why it may be upward-sloping with respect to additional capital, and calculate and interpret its break-points;

What is the marginal cost of capital (MCC)? The marginal cost of capital (MCC) is the cost of obtaining another dollar of new capital. The marginal cost rises as more and more capital is raised during a given period.

What is the marginal cost of capital schedule? The marginal cost of capital schedule is a graph that relates the firm’s weighted average cost of each dollar of capital to the total amount of new capital raised.

In relation to marginal cost of capital what is a break point? The break point (BP) is the dollar value of new capital that can be raised before an increase in the firm’s weighted average cost of capital occurs.