It’s always good to have the debt equity ratio of 1 to have a lower WACC:

The statement "It’s always good to have the debt equity ratio of 1 to have a lower WACC" is not necessarily true in all cases. Here's why:

1. The Debt Equity Ratio: This ratio is a measure of a company's financial leverage, calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A ratio of 1 means that investors and creditors equally contribute to the assets of the business.

2. The Weighted Average Cost of Capital (WACC): This is the average rate of return a company is expected to pay its investors; the weights are the proportion of debt and equity in the company's capital structure. The WACC increases as the beta and rate of return on equity increases, as an increase in WACC denotes a decrease in valuation and a higher risk.

3. The Relationship: While a lower WACC is generally a sign of a lower cost of capital, it's not as simple as saying a debt equity ratio of 1 will always result in a lower WACC. The cost of debt is typically lower than the cost of equity, so increasing the proportion of debt in the company's capital structure will decrease WACC. However, this also increases the financial risk of the company, as debt comes with the obligation to make regular interest payments. If these payments are not made, the company could go into bankruptcy.

4. The Optimal Capital Structure: Therefore, there is an optimal capital structure, where the cost of capital is minimized, which balances the cost of equity and debt. This is not necessarily a debt equity ratio of 1, and will vary from company to company.

So, it's not accurate to say it's always good to have a debt equity ratio of 1 to have a lower WACC. It depends on the company's risk profile, the cost of equity, the cost of debt, and the company's ability to make its interest payments.