A Firm's Correctly Computed Capital Structure Consists of 20% Debt

Multiple Choice

A firm's correctly computed capital structure consists of 20% debt, 10% preferred stock, and 70% equity. If new debt of $3 million can be raised at the current interest rate before a higher yield must be paid to investors, at what point will the MCC break upward because of the cost of debt?

A) $3,000,000
B) $10,000,000
C) $15,000,000
D) None of the above