8. Marginal cost of capital (MCC) schedule As a company raises more and more funds, the cost of those funds begins to rise. As this occurs, the weighted cost of each new dollar rises. This is called the marginal cost of capital. A graph that shows how the weighted average cost of capital changes as more new capital is raised by the firm is called the MCC (marginal cost of capital) schedule. 11.8 11.6 114 112 11.0 10.8 10.6 10.4 10.2 20 40 100120 14 160 Dollars of new capital raised ( Milions) If this company raises $160M, its weighted average cost of capital is The breakpoints in the MCC schedule occur at Does the cost of capital schedule below match the MCC schedule depicted on the graph? of newly raised capital. No Yes Screenshot if $60M IS raised if $134M IS raised if $160M IS raised Breakdown of funds: After-Tax Component Cost 6.0% 11.0% After-Tax Component Cost 6.3% 11.0% Capital Co Weight Amount Source Debt Preferred 0.45 0.05 $270 $3.0 Amount $603 $6.7 Amount $720 $8.0 stock 0.50 $30.0 Common equity Total capital 14.7% $67.0 15.23% $80.0 $60.0 $134.0 $160.0 Grade It Nowatinue 8. Marginal cost of capital (MCC) schedule As a company raises more and more funds, the cost of those funds begins to rise. As this occurs, the weighted cost of each new dollar rises. This is called the marginal cost of capital. A graph that shows how the weighted average cost of capital changes as more new capital is raised by the firm is called the MCC (marginal cost of capital) schedule. 11.8 11.6 114 112 11.0 10.8 10.6 10.4 10.2 20 40 100120 14 160 Dollars of new capital raised ( Milions) If this company raises $160M, its weighted average cost of capital is The breakpoints in the MCC schedule occur at Does the cost of capital schedule below match the MCC schedule depicted on the graph? of newly raised capital. No Yes Screenshot if $60M IS raised if $134M IS raised if $160M IS raised Breakdown of funds: After-Tax Component Cost 6.0% 11.0% After-Tax Component Cost 6.3% 11.0% Capital Co Weight Amount Source Debt Preferred 0.45 0.05 $270 $3.0 Amount $603 $6.7 Amount $720 $8.0 stock 0.50 $30.0 Common equity Total capital 14.7% $67.0 15.23% $80.0 $60.0 $134.0 $160.0 Grade It Nowatinue