Marginal Cost of Capital (MCC)

The MCC is defined as the cost of the last rupee of new capital that the firm raises, the marginal cost rises as more and capital is raised during a given period. A firms marginal cost of also know as weighted marginal cost of WMCC reflects the fact that as the volume of total new financing increase, raising the firms cost of capital. Breaking points, which are found by structure weight, represent the level of total new financing at which the cost of one of the financing components rises, causing an upward shift in the weighted marginal cost of capital. The weighted average cost of capital is the firm WACC associated with its next rupee of total new financing. For the project evulation purpose, the marginal to cost of capital is more relevent then

the weighted average cost of capital .