The weighted average cost of capital increases if the total funds required call for an amount of equity in excess of what can be obtained as retained earnings.

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is impacted by the proportion of debt and equity in a company's capital structure. When a company requires more equity than it can obtain through retained earnings, it may have to issue new equity, which increases the cost of equity and, consequently, the WACC.

The Weighted Average Cost of Capital Increases If the Total