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Cost of Capital

Financial Management

1. In the following two questions, they asked for WACC and Marginal cost of capital, what is the difference between these two, look similar in computation?

Prethivi Rajan

CA Final

★ 9K+

06-Apr-23 16:20

210

Answers (3)

Marginal cost in a way can be computed only after computing WACC

Angel Maria Varghese

CA Final

★ 8K+

06-Apr-23 18:18

Marginal cost (MCC) is basically the cost of raising additional funds. WACC is the cost of all the funds. MCC will be different from WACC when the proportion in which additional funds are raised is different from the existing ratio and also when cost of components i.e. debt, equity, pref. shares changes as additional funds are raised. When the proportion and cost of component remains same, MCC = WACC

Sahibdeep Singh

CA Inter

★ 14K+

07-Apr-23 18:31

Sahibdeep Singh

Marginal cost (MCC) is basically the cost of raising additional funds. WACC is the cost of all the funds. MCC will be different from WACC when the proportion in which additional funds are raised is different from the existing ratio and also when cost of components i.e. debt, equity, pref. shares changes as additional funds are raised. When the proportion and cost of component remains same, MCC = WACC

Thanks Sir

Thread Starter

Prethivi Rajan

CA Final

★ 9K+

07-Apr-23 18:37

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Cost of Capital

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