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A company may finance its operations using debt or equity; or a combination of both. If and when a company increases its debt, what happens to its WACC?




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Weighted average cost of capital (WACC) can be referred to as the average return rate a company or institution expects to reimburse its investors. The weights are the charge of each financing source in the company’s objective. Equity financing involves the raising of funds through the selling of shares of stock. Equity financing consists of the raising of funds through the sale of shares to different parties or individuals who in return will be in need of interest (Welch, 2004).

(236 words)

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