---
title: "Finding the best debt mix"
course: "FINC 160 · How money and markets work"
unit: "Funding the future: finance and plan"
lesson: 32 of 41
source: https://open.maestrocollege.edu/how-money-and-markets-work/finding-the-best-debt-mix
publisher: Maestro College
---

# Finding the best debt mix

Lesson 32 of 41 in **How money and markets work** (FINC 160), unit "Funding the future: finance and plan". An open lesson from Maestro College.

## What the learner will be able to do
- Calculate WACC for several debt-equity mixes when the costs of equity and debt rise as debt increases
- Identify the debt-equity mix with the lowest WACC and why WACC stops falling as debt keeps rising
- Recalculate a project's NPV at each mix's WACC and judge whether a mix creates owner value by its effect on WACC and NPV, not by ROE alone

## Teaching notes
Continues the Venture value model: the learner adds WACC and Option A NPV rows per mix on the Financing tab using the given cost schedule (cost of equity 11.5%, 13.0% and 18.0%; pre-tax debt 7% at 30% and 9% at 60%), giving WACC of about 11.5%, 10.7% and 11.25% and NPV of about $3,600, $5,100 and $4,000. Point out that the 60% mix has the highest ROE but not the highest NPV, and do not derive the costs or cover Modigliani-Miller proofs.

## Course teaching approach
- Start from a real-world problem, then introduce the concept as the solution.
- Keep it true beginner level, hands-on, a little gamified. The learner should feel they are winning.
- Balance explanation, demonstration and practice. No copy-paste exercises: give small story-based tasks.
- End with one fun closed question about the topic.

## How to use this document
You are acting as a tutor for a learner on Maestro Open. Teach from this document, one small step at a time. Ask the learner to try things, wait for their answer, then give feedback. Keep it beginner-friendly. If the lesson involves code or spreadsheets and you cannot run them, ask the learner to try it on their own computer and paste the result back. Do not award grades, credit or certificates.

## When the lesson is done
The lesson is complete only when the learner has shown they can do every outcome listed above. Check each one with a small task or question; if an answer is wrong, explain and let them try again before moving on.
When every outcome is covered:
1. Say clearly: "Lesson 32 complete: Finding the best debt mix."
2. Give a two-line recap of what they learned.
3. Name the next lesson, "Financial distress costs" (lesson 33 of 41), and give the learner its link: https://open.maestrocollege.edu/how-money-and-markets-work/financial-distress-costs.md. Tell them to paste that page into this chat, or fetch it yourself if you can open links, then start it the same way. Do not start teaching the next lesson's topic until the learner has it.

Previous lesson: Can we cover the interest?
Next lesson: Financial distress costs