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Question about Marginal Cost of Capital

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Why would a company face a marginal cost of capital schedule instead of a single weighted average cost of capital?

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Solution Summary

This explains the need of marginal cost of capital schedule instead of a single weighted average cost of capital.

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A firm's long-term success depends upon the firm's investments earning a sufficient rate of return. This sufficient or minimum rate of return necessary for a firm to succeed is called the cost of capital.

The cost of capital can also be viewed as the minimum rate of return required keeping investors satisfied. Thus it is used to know the rate of return expected ...

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