Weighted Marginal Cost of Capital

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Weighted Marginal Cost of Capital
Mohammed El-Sherbiny, Member
Dear Friends, kindly, I need your support to get more knowledge about Weighted Marginal Cost of Capital. What is meant with that and what is the difference with WACC?

What is (Weighted) (Marginal) Cost of Capital
Jaap de Jonge, Editor
Obviously, both Weighted Average Cost of Capital (WACC) and Marginal Cost of Capital measure the Cost of Capital.
Capital is any money used to finance a business and/or its operations. There are many different sources (types) of capital: traditional debt or equity financing or owner financing, grants, gains on investment capital, retained earnings, accrual financing contracts and forward payment agreements on capital.
There is a cost associated with obtaining capital. The cost is NOT the same for each type! The cost also changes over time.
That's why we have the Marginal Cost of XYZ: the cost associated with raising one extra dollar at a particular moment via any particular form of capital.
Likewise, the Weighted Marginal Cost of Capital (WMCC) is the WACC applicable to the next dollar of the total new financing.

How to Calculate Weighted Marginal Cost of Capital
Mohammed El-Sherbiny, Member
@Jaap de Jonge (Editor): Dear sir, thank you for your support. I actually need a techniques and methods to calculate it.

How to Calculate WMCC
Jaap de Jonge, Editor
Basically the way of calculating WMCC is the same as for calculating WACC, except that a TRUE Marginal Cost of Capital problem will include floatation costs and take into account breakpoints in the cost of capital.
Here is a series of 4 videos on calculating WMCC which is pretty extensive. Enjoy!


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