There is a jump,or break,in a firm's MCC schedule each time the firm runs out of a particular source of capital at a particular cost.For example,a firm may use up its 10 percent debt and can then issue more debt only if it offers a higher rate to investors.

Question

Quizplus · Accepted Answer

This statement is true. The marginal cost of capital (MCC) schedule reflects the cost of each additional unit of capital raised by the company, and when the firm exhausts a specific source of capital at a particular cost, it may need to issue new capital at a higher cost, causing a jump or break in the MCC schedule.

There Is a Jump,or Break,in a Firm's MCC Schedule Each