• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Finance Train

Finance Train

High Quality tutorials for finance, risk, data science

  • Home
  • Data Science
  • CFA® Exam
  • PRM Exam
  • Tutorials
  • Careers
  • Products
  • Login

Marginal Cost of Capital (MCC) Schedule

CFA® Exam, CFA® Exam Level 1, Corporate Finance

This lesson is part 11 of 12 in the course Cost of Capital

MCC Schedule is a graph that relates the firm’s weighted average of each dollar of capital to the total amount of new capital raised.

It reflects changing costs depending on amounts of capital raised. As more funds are raised, the cost of various sources of capital can change because of various reasons:

  • The firm may have existing debt with a bond covenant that restricts the company from issuing debt with similar seniority as existing debt.
  • Debt incurrence test may restrict a company ’ s ability to incur additional debt at the same seniority based on one or more financial tests or conditions.
  • As the company experiences deviations from the target capital structure, the marginal cost of capital may increase, reflecting these deviations.

An additional amount of capital that changes the WACC is referred to as a break point. This is the point at which the cost of one of the sources of capital changes.

The break point is calculated using the following formula.

Break Point = Amount of Capital at which Sources Cost of Capital Changes/Proportion of New Capital Raised from the Source

Example

The following capital structure data is available:

The MCC schedule will look as follows:

Download the MCC Schedule Excel Sheet

Previous Lesson

‹ Estimating the Country Risk (Country Equity Premium)

Next Lesson

Flotation Costs and WACC ›

Join Our Facebook Group - Finance, Risk and Data Science

Posts You May Like

How to Improve your Financial Health

CFA® Exam Overview and Guidelines (Updated for 2021)

Changing Themes (Look and Feel) in ggplot2 in R

Coordinates in ggplot2 in R

Facets for ggplot2 Charts in R (Faceting Layer)

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Primary Sidebar

In this Course

  • Weighted Average Cost of Capital (WACC)
  • Weighted Average Cost of Capital (WACC) – Practical Example and Issues
  • Applications of Cost of Capital
  • Calculating Cost of Debt: YTM and Debt-Rating Approach
  • Issues in Estimating Cost of Debt
  • Estimating the Cost of Preferred Stock
  • Estimating the Cost of Common Stock
  • Calculating Beta Using Market Model Regression (Slope)
  • Calculating Beta Using Pure Play Method
  • Estimating the Country Risk (Country Equity Premium)
  • Marginal Cost of Capital (MCC) Schedule
  • Flotation Costs and WACC

Latest Tutorials

    • Data Visualization with R
    • Derivatives with R
    • Machine Learning in Finance Using Python
    • Credit Risk Modelling in R
    • Quantitative Trading Strategies in R
    • Financial Time Series Analysis in R
    • VaR Mapping
    • Option Valuation
    • Financial Reporting Standards
    • Fraud
Facebook Group

Membership

Unlock full access to Finance Train and see the entire library of member-only content and resources.

Subscribe

Footer

Recent Posts

  • How to Improve your Financial Health
  • CFA® Exam Overview and Guidelines (Updated for 2021)
  • Changing Themes (Look and Feel) in ggplot2 in R
  • Coordinates in ggplot2 in R
  • Facets for ggplot2 Charts in R (Faceting Layer)

Products

  • Level I Authority for CFA® Exam
  • CFA Level I Practice Questions
  • CFA Level I Mock Exam
  • Level II Question Bank for CFA® Exam
  • PRM Exam 1 Practice Question Bank
  • All Products

Quick Links

  • Privacy Policy
  • Contact Us

CFA Institute does not endorse, promote or warrant the accuracy or quality of Finance Train. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

Copyright © 2021 Finance Train. All rights reserved.

  • About Us
  • Privacy Policy
  • Contact Us