For Midland Energy Resources Cost of Capital: How sensitive is the corporate weighted average cost of...
For Midland Energy Resources Cost of Capital: How sensitive is the corporate weighted average cost of capital to changes in the target debt/equity ratio?
Homework Answers
The weighted average cost of capital is sensitive to target debt/equity ratio. The formula of WACC is, if the there is only debt and equity in the organisation ie
WACC = (Weight of debt*Cost of debt) + (Weight of equity*Cost of debt)
When the ratio of debt/equity changes, sometimes the debt and equity value changes so it will effect the weighted average cost of capital.
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For Midland Energy Resources Cost of Capital: How sensitive is
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Weighted average cost of capital
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