The last para in the answer to this LOS states that "we can conclude that NPVs of potential projects of firm avg risk should be calculated using the MCC for the firm. Now, the big doubt which has been there since time immemorial and cleared so many times on this forum:-
- MCC is the cost of capital for the new capital structure. WACC is for the exisitng risk. People say that MCC is same as WACC, but that shd be possible only when the new project’s risk= existing risk, not otherwise.
Can you always say MCC=WACC?
in this case, because new risk is same as avg old risk, WACC=-MCC, right??