what is the difference between average cost of capital and marginal cost of capital?
While we evaluate the cost of additional funds raised, it is called the marginal cost of capital. ... For example, if Company A is financed by$100,000 of debt at 7%, $50,000 of equity at 12% and $75,000 of owner financing at 0%, the average cost of capital would be 7% + 12% + 0% divided by 3 = 19%/3 = 6.33%.