Briefly describe relationship between a firms WACC and its capital structure referencing the Static Theorys focus on
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Question:
Briefly describe relationship between a firms WACC and its capital structure referencing the Static Theorys focus on the delicate balance of debt and equityand the influence on the WACC and a firms ultimate value. Judging by question #2 in Section 2 below, how could you change the firms capital structure to lower its WACC and strengthen its NPV? What is the risk in reshaping the capital structure to incurring more debt or equity?
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