kkn006

CFA rhythm: the DDM and GG are for valuing a firm, not for finding cost of capital. the sensitive denominator exists in valuation of the hwole firm too (i.e. wacc - g).

reggie: i think i sorta see what youre saying..are you just implying that above a certain optimal point of debt, equity capital increases more as equity becomes more risky. therfore, cost of equity increases a lot but the increase in wacc is "held back" because it is proporitonally added with cost of debt, which does not rise as much.

kind of a stretch haha