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What are the two potential effects on WACC of increasing gearing level?

Accounting Cost Accounting Financial Reporting Financial Management Economics
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Question added by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER
Date Posted: 2016/05/01
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Dasarathi Rath
by Dasarathi Rath , Sr. Accountant , Al Luban Special Investment LLC

The two potential effects on WACC of increasing gearing level are :- 1. Computation of equity capital. 2. Assignment of weight to the cost of specific source of financing. Assignment of weight can be possible either on basic of historical weighting or marginal weighting. The increasing gearing level are :- A. Book value weight B. Market value weight

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