Weighted Average Cost of Capital (WACC) theory suggests there is an optimal capital structure. Discuss this statement to include an explanation of: What is meant by ‘capital structure’. How changes in...

1. Weighted Average Cost of Capital (WACC) theory suggests there is an optimal capital structure.

Discuss this statement to include an explanation of:

• What is meant by ‘capital structure’.


• How changes in capital structure effect WACC


• The relationship of WACC to the market value of a company


• The traditional view of the optimum gearing ratio.

             You may find graphical illustration(s) can support your discussion.