luda002

I think they're is an optimal level, for a firm, of debt and equity capital structure. So at a certain point equity captial becomes more and more expensive and I firm would find it better or cheaper to employ/raise debt financing. Therefore equity capital alone is more sensitive to leverage, whereas WACC is average over debt and equity and isn't nearly as sensitive to changes in the capital structure of a firm.

If that makes any sense. That's just the way I look at it. Any other ideas..?