Calculating the Marginal Cost of Capital for XYZ Corporation

XYZ Corporation is planning to expand its operations and is considering multiple financing options. The company has an existing capital structure comprising 40% debt and 60% equity. Currently, the cost of debt is 6%, and the cost of equity is estimated at 10%. As the company takes on more debt to finance the expansion, its cost of new debt is expected to rise to 7%, while the cost of equity will increase to 12% due to the higher risk perceived by investors. To facilitate this expansion, the management is concerned about the marginal cost of capital (MCC) which will play a crucial role in determining the optimal capital structure and evaluating future investment projects. What is the marginal cost of capital if XYZ Corporation finances its new investments solely with new debt?