[Verse 1]
When companies need funding, they start with cheapest debt
Bank loans and bonds are bargains when amounts are modest yet
But push beyond that comfort zone, the lenders start to frown
Interest rates climb steeper as the borrowing weighs down
[Chorus]
Marginal cost climbs the ladder, step by step it's getting fatter
More you borrow, more you pay, MCC curve shows the way
Debt gets costly, equity's pricey, weighted average keeps on rising
When you plot it, see the slope, financing's slippery rope
[Verse 2]
Picture buckets filled with water, cheapest sources drain first
Retained earnings cost the least, but those reserves disperse
Issue new stock to investors, dilution makes them wince
Higher returns they'll demand, your cost per dollar since
[Chorus]
Marginal cost climbs the ladder, step by step it's getting fatter
More you borrow, more you pay, MCC curve shows the way
Debt gets costly, equity's pricey, weighted average keeps on rising
When you plot it, see the slope, financing's slippery rope
[Bridge]
Breakpoints mark the boundaries where cheap funds disappear
Tax shields shrink as leverage grows, bankruptcy draws near
Plot the curve on graphs to see how capital gets dear
Each new dollar costs you more, the pattern crystal clear
[Verse 3]
Calculate each tier of funding, weight by market values true
Multiply the costs together, blend the old debt with the new
As the curve keeps climbing upward, projects face the test
Only investments beating MCC will serve shareholders best
[Chorus]
Marginal cost climbs the ladder, step by step it's getting fatter
More you borrow, more you pay, MCC curve shows the way
Debt gets costly, equity's pricey, weighted average keeps on rising
When you plot it, see the slope, financing's slippery rope
[Outro]
MCC curve tells the story, cheap to expensive glory
Budget wisely, know the cost, or profits will be lost