I understand that the WACC is influenced by the debt ratio but what is the impact of the inflation on the WACC
1 Answer
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The WACC (weighted average cost of capital) formula is a weighted average of the cost of equity and the cost of debt weighted by their respective size (see investopedia definition here). As such, it does not include the inflation rate directly.
Inflation should increase the nominal rate of return that investors require to make an investment, especially on the debt side as inflation erodes nominal bonds returns.