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Disadvantages of Weighted Average Cost of Capital (WACC)The disadvantages are stemmed mainly from the assumptions of the applicability of WACC. The practicability and limitations of the assumptions are discussed below. The remedy to overcome the problem is also specified.
The remedy to this problem is that the target capital structure should be taken into consideration and not the existing. and therefore, the calculation of WACC should be adjusted accordingly.
The remedy to this problem is that the WACC should be adjusted to take effect of the change in risk.
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