A firm's target capital structure is 30% debt and 70% equity and retained earnings are planned at $1.4 million. The first breakpoint in the MCC is at $2 million.

Question

Quizplus · Accepted Answer

The first breakpoint in the MCC is at $2 million, which is greater than the planned retained earnings of $1.4 million. Therefore, the firm will not reach the first breakpoint in the MCC and will not need to issue any new debt or equity.

A Firm's Target Capital Structure Is 30% Debt and 70