The Cost of Capital – The Effect of Changes in Gearing – ACCA Financial Management (FM)

John Moffat says
February 22, 2019 at 2:41 pm
Pecking order theory is concerned with the raising of long-term capital (not short-term finance, which is what delaying payments is).
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alastairk says
February 22, 2019 at 7:55 am
Hi John,
In terms of financing working capital , within the pecking order theory where would you place
withholding supplier payments?
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alinaqvi111 says
December 19, 2018 at 11:33 am
Hello sir,
How can there be a cost of debt 10% in the example 1 when there is no debt at all. 0 % share of debt is given in scenario 1 of example 1?
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- John Moffat says
  December 19, 2018 at 2:27 pm
  Why not? Maybe you could borrow money from the bank at a cost of 10% – it doesn’t mean you will necessarily be borrowing it 🙂
  Anyway, the graph is only of relevance in explaining what happens to the WACC and since they are not borrowing debt at 0% gearing, it is not included in the calculation of the WACC!!
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  - alinaqvi111 says
    December 20, 2018 at 7:26 am
    That expalains it.
    Thank you 🙂
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  - John Moffat says
    December 20, 2018 at 7:35 am
    You are welcome 🙂
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