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 ?
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