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Hi Sir!
How a company knows they are reaching optimum level of gearing to have minimum WACC?Thank you.
I assume you are referring to the traditional theory of gearing as opposed to Modigliani and Millers theories, in which case it will really be a case of trial and error.
As they need more finance they will keep raising debt until such time as the WACC starts to increase. That will mean that they have reached optimal gearing.
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