A firm's correctly computed capital structure consists of 20% debt, 10% preferred stock, and 70% equity. If retained earnings of $2 million are expected, at what point will the MCC schedule break upward as retained earnings are replaced with new equity?

A) $2,857,143
B) $2,000,000
C) $2,436,372
D) $3,400,000

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders.

MCC Schedule

Stands for Marginal Cost of Capital Schedule, which displays the relationship between the cost of new capital and the total amount of new capital raised.

Capital Structure

Capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities.