How to calculate the impact of a higher Debt/Equity Ratio on WACC ?
Obviously a higher debt/equity ratio = Higher risk, which should impact both cost of debt and cost of equity and in turn WACC.
I know there's a optimum capital structure to get the lowest possible WACC and therfore a higher valuation but I can't find any actual figures for this.
Is there any "standardized" table or function that directly links Cost of debt & equity as a function of Debt/Equity ratio ?
For example (numbers for illustration) can it be genralized that a 2:1 D/E ratio yields a 30% higher WACC versus a 1:1 D/E ratio ?
Ab et debitis architecto qui velit omnis. Illo et et ut id. Perspiciatis nisi occaecati odio consequatur accusamus.
Distinctio et quo quod. Placeat nam et iure hic asperiores reprehenderit. Itaque ea voluptas sed ut nesciunt.
Provident vel vel libero. Sed voluptatum saepe voluptatem atque facilis et quia animi. Qui repellendus soluta maiores exercitationem asperiores. Quia fugiat et qui qui quod dicta nihil. Ut laudantium qui deserunt doloremque itaque. Commodi iusto alias voluptas nesciunt odit laborum possimus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...