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Williams Glassware: EPS and optimal debt ratio, CV

Williams Glassware has estimated, at various debt ratios, the expected earnings per share and the standard deviation of the earnings per share as shown in the attached table.

a) estimate the optimal debt ratio on the basis of the relationship bewtween earnings per share and debt ratio. You will probably find it helpful to graph the relationship.

b) graph the relationship between coefficient of variation and the debt ratio. Label the areas associated with business risk and financial risk.

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See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks

Williams Glassware has estimated, at various debt ratios, the expected earnings per share and the standard deviation ...

Solution Summary

Solves the problem on Williams Glassware and shows how to calculate the EPS, coefficient of variation, etc.

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