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(1) Kindly advice what is the effect on WACC if the capital structure is change by additional debt
(2) What is the effect on WACC if the capital structure is change by additional shares
Have you watched the free lectures on the effect of gearing?
It is discussed there in great detail and I cannot simply type out the whole lecture here.It is related to Modigliani and Miller.
If there is no tax, then in theory the WACC is independent of the level of gearing.With tax, then more gearing will result in a lower WACC because of the tax shield on the debt finance (whereas lower gearing will result in a higher WACC).
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