Chapter 11 Assignment Search this cours 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 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. 114 WACC (Percento 110 108 104 102 100 tv & 11.6 11.4 11.2 WACC (Percent) 11.0 108 m 10.4 102 0 20 40 60 80 100 120 140 Dollars of new capital raised (5 Millions) 160 If this company raises $160M, its weighted average cost of capital is The breakpoints in the MCC schedule occur at of newly raised capital. Does the cost of capital schedule below match the MCC schedule depicted on the graph? Yes O No Breakdown if $50M if $100M if $160M WACC 10.8 10.6 10.4 10.2. 0 20 40 60 80 100 120 Dollars of new capital raised ($ Millions) 140 160 If this company raises $160M, its weighted average cost of capital is 11% The breakpoints in the MCC schedule occur at wly raised capital. 11.6% Does the cost of capital schedule below match the MCC schedule deple 16.7 e graph? O Yes 11.4% Breakdown of funds: if $50M is raised if $100M is raised if $160M is raised 10,6 10.4 10.2 0 20 40 60 80 100 120 140 Dollars of new capital raised ($ Millions) 160 If this company raises $160M, its weighted average cost of capital is The breakpoints in the MCC schedule occur at of newly raised capital. Does the cost of capital schedule below match 11.4% and 11.6% bicted on the graph? $50M and $100M O Yes Breakdown of funds: if $50M is raised if $100M is raised if $160M is raised Ager If this company raises $160M, its weighted average cost of capital is The breakpoints in the MCC schedule occur at of newly raised capital. Does the cost of capital schedule below match the MCC schedule depicted on the graph? O Yes O No Breakdown of funds: if $50M is raised if $100M is raised if $160M Is raised Capital source After-Tax Component Cost After-Tax Component Cost After-Tax Component Cost Amount Amount Amount Weight 0.45 Debt $22.5 6.0% $45.0 6.3% $72.3 6.5% Preferred 0.05 $2.5 11.0% $5.0 11.0% $8.0 11.0% stock Common 0.50 $25.0 15.5% $50.0 16.03% $80.0 16.25% equity Total capital $50.0 $100.0 $160.0 Grade It Now Save & Continue Continue without saving