Even if a firm obtains all of its ordianry equity from retained earnings, its MCC schedule might still increase if very large amounts of new capital are needed.

Question

Quizplus · Accepted Answer

The MCC schedule takes into account the cost of all types of capital, not just ordinary equity obtained from retained earnings. If a firm needs to raise a significant amount of new capital, it may need to issue other types of securities such as debt or preferred stock, which will increase its weighted average cost of capital.

Even If a Firm Obtains All of Its Ordianry Equity