PPT Slide

• Depreciation is a noncash expense.

• Depreciation cash flow is available to for dividends or retained earnings, e.g., could repurchase debt or stock.

• These funds therefore have an opportunity cost equal to the WACC using retained earnings, 10.3%.

• This will shift the MCC schedule outward by the $ of depreciation.

What effect does depreciation have

on the MCC schedule?

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