From the definition of WACC, it can be deduced that WACC is dependent on the firm’s capital structure and the market’s valuation of the firm’s riskiness as reflected in the sources of the cost of capital, this is assuming that the corporate tax rate is constant. It is within the prerogative of the firm’s decision makers to change the percentage of debt to equity ration of the firm. Thus, changing the firm’s capital structure can decrease WACC. In general, debt is cheaper than equity but at the same time, increasing debt means higher riskiness and could lead to higher Kd and Ke.