WACC Simulation

Paper Summary:

This document discusses the weighted average cost of capital (WACC) and how it is employed by analysts, executives, and investors to make intelligent decisions about investments and business strategies. The paper examines a simulation in order to study WACC utilization principles while the conclusion discusses WACC relative to its application in the marketplace.

From the Paper:

"The WACC-Debt to Equity simulation is an excellent exercise in the practical application of WACC relative to the management of an ongoing concern's debt to equity capital structure. While a small start can be less concerned about the nuances of its capital structure because they are usually funded from savings and thus well capitalized at the beginning, as soon as a small to medium enterprise begins to consider expansion or capital improvements, then determining WACC to evaluate funding strategies becomes paramount. Dayanada points out that determining the optimum debt to equity structure at the beginning of an initial expansion can determine the long term viability of the enterprise itself. "

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