The Weighted Average Cost of Capital (WACC) is built up from multiple inputs. In the current pandemic, there will likely be different directional changes across those inputs. Consider the table below table and assess how each of the individual inputs could affect the WACC. Express you answer by indicating whether the change would increase, decrease, or have no change on the WACC? Conclude your assessment with a discussion regarding your opinion of how the WACC for firms may change if COVID-19 remains a health and business threat for a duration greater than 10 years.

Potential COVID-19 effects WACC input Potential change in WACC

Increased credit and liquidity risk of entity Cost of debt

Volatility of entity's equity compared to market Beta

Cash flow forecasting and Specific risk premium

Risk appetite for market participants Market risk premium

Government bond yields Risk-free rate

Level of borrowing Capital structure