Marginal Cost of Capital refers to:
ACost of equity only
BAverage cost of all past borrowings
CCost of additional capital raised
DCost of debt minus tax
Answer & Solution
Correct answer: C. Cost of additional capital raised
1. Marginal Cost = cost of an additional rupee of capital.
2. Computed using current incremental component costs and the new capital structure weights.
3. Different from average historical WACC.
_Source: ICAI BoS CA Inter Paper 6A, Ch 4 "Cost of Capital", §11_
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