Additional Sales
Additional Funds
Additional Interests
None of the above
Answer is Right!
Answer is Wrong!
The correct answer is: B. Additional Funds.
Marginal cost of capital (MCC) is the additional cost of raising an additional unit of capital. It is the rate of return that a company must earn on its new investments in order to satisfy its investors.
A. Additional Sales is not the cost of capital. Sales are the revenue that a company generates from its business activities. The cost of capital is the cost of financing those business activities.
C. Additional Interests is not the cost of capital. Interest is the cost of borrowing money. The cost of capital is the cost of financing all of a company’s activities, including borrowing money.
D. None of the above is the correct answer.