The firm's capital structure is 20% debt, 30% preferred stock and 50% equity. Debt of $2.5 million is expected to be available at a relatively low cost. Debt beyond that amount will cost substantially more. Where will the MCC break because of an increase in the cost of debt?
A) $2.5 million
B) $5.0 million
C) $10.0 million
D) $12.5 million
E) $15.0 million
Correct Answer:
Verified
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