Which one of the following statements about the marginal cost of capital (MCC) is TRUE? Answer is The breakpoint on the marginal cost curve is calculated by dividing retained earnings by the equity weight in the capital structure. Could you please elaborate the answer. I did not understand it.

I posted a thread about this question earlier, if you google the breakpoint of the marginal cost curve, you can find some pretty good explanations on what it is, but as such for 2007 L1, it was not part of any LOSs, I think it’s just an error on schweser (assuming you got the question from schweser) that they included this questions, hiredguns1 mentioned it was included in an LOS for 2006, maybe that’s why schweser mistakenly included it in this year’s version, don’t worry too much about it

Thanks a lot for reply. I will ignore it for l1