Question
for the following statement as the fraction of the firm financed with debt increases, both the equity and debt become riskier and their cost of
for the following statement as the fraction of the firm financed with debt increases, both the equity and debt become riskier and their cost of capital rises. Yet because more weight is put on the lower cost of debt the WACC remains constant.
could you explain why more weight is put on the debt and why WACC remains unchanged?
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Fundamentals of Investment Management
Authors: Geoffrey Hirt, Stanley Block
10th edition
0078034620, 978-0078034626
