Understanding Marginal Cost of Capital

Marginal Cost of Capital (MCC) is a critical concept in corporate finance that reflects the cost of obtaining additional capital for financing investments. It is important for firms to understand their MCC as it guides decisions on project financing and capital budgeting. Consider a company that currently has a capital structure comprised solely of equity. If the company decides to raise funds through new equity issuance, the cost of this new equity will impact the company's overall cost of capital. Which of the following statements correctly describes Marginal Cost of Capital?