What argument opposes Rockler's decision not to change its WACC?

The argument opposing Rockler's decision not to change its Weighted Average Cost of Capital (WACC) is grounded in the premise that assumptions about market returns can change over time. The WACC is a critical measure because it reflects the average cost of a company's financing sources, both equity and debt, adjusted for the risk associated with its operations. Market conditions, interest rates, and investor expectations can evolve due to economic shifts, changes in fiscal policy, or emerging market trends.

When market assumptions change—such as a rise in interest rates or a shift in perceived risk associated with specific investments—it directly impacts the requisite returns investors expect. If a company like Rockler does not adjust its WACC to reflect these changing conditions, it risks making investment decisions based on outdated metrics, which could lead to suboptimal capital allocation.

This perspective emphasizes the importance of regularly updating financial assumptions to ensure they align with current market realities, thereby maintaining effective financial decision-making and strategic planning in a dynamic business environment.