/usr/share/dx/java/htmlpages/wacc.html is in dxsamples 4.2.0-1.
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<title>Open Visualization Data Explorer: Finance</title>
</head>
<body bgcolor="white">
<p>
<h3>...about the visualization</h3>
A fundamental decision facing financial managers is the
financing of a firm's activities. There are 2 sources
of funds: debt financing or selling
bonds, and equity financing or selling stock.
Two important considerations face the manager:
<ul>
<li>Financial decisions have tax implications. Payments
made to bondholders to service the firm's debt are made
with pre-tax dollars. Stock dividends are paid from after-tax
income.
<li>The amount of debt versus equity financing may
influence the investors' desire to buy the firm's
securities. As leverage increases, the expected risk and
return of the firm's stick will increase as
will the expected loss due to bankruptcy.
</ul>
Since the manager's job is to maximize the value of the firm
we expect her to finance the firm's activities using the
mix of debt and equity financing which results in the lowest
cost of capital to the firm. Other things being equal,
we expect debt financing to be less
expensive than equity financing
because of the tax implications. We also expect
an increase in in debt financing to increase the cost
of equity financing because of the effect of financial
leverage on the risk of the firm's stock.
<p>
<table border = 0>
<tr>
<td>
<h3>...about the visual program</h3>
The axes' labels:
<ul>
<li>rE....The return on the firm's equity. In other words, the price
the firm pays to attract investors to purchase its stock.
<li>rD....The return on the firm's debt. In other words, the price
paid to bondholders.
<li>r*....The <i>Weighted Average Cost of Capital</i>
</ul>
You can vary the corporate tax rate and debt:equity ratio in order
see how taxes and changes in financing strategy will affect the
cost of capital and thus, the decisions made by managers. As
the corporate tax rate increases, managers will be more likely
to use debt financing other things being equal. The plane
represents the set of points we might expect to occur. Note that in
the real world, a firm's bonds almost always pay less
than its stock. Therefore the visual program removes situations
in which rD > rE by marking them invalid.
</td>
<td>
<applet
code="wacc.class" width = 300 height = 250
codebase=../
archive=htmlpages/dx.jar,htmlpages/samples.jar
MAYSCRIPT=true
>
<param name="name" value="wacc">
<param name=NETNAME value="wacc.net">
<param name=DXUIVERS value="4.1.1">
<param name=BACKGROUND value="[1.0, 1.0, 1.0]">
<param name=EXECUTE_ON_CHANGE value="true">
</applet>
</td>
</tr>
</table>
<h3>...about the conversion to web page</h3>
Select <i>Pick</i> mode in the Execution panel. Then by clicking on
the cost-of-capital plane, you will see values at that point on the plane.
<br>
<table border=2>
<tr bgcolor=black>
<td>
<applet
code="imageWindow.class" width = 606 height = 519
codebase=../
archive=htmlpages/dx.jar,htmlpages/samples.jar
MAYSCRIPT=true
>
<param name=INITIAL_IMAGE value="htmlpages/wacc1.0.0.gif">
<param name=IMAGE_NODE value="Image_1">
</applet>
</td>
</tr>
</table>
<p>
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</body>
</html>
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