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EPS and Optimal Debt Ratio

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I need some help in estimating the Optimal Debt Ratio with steps.

DEBT RATIO EPS STANDARD DEVATION OF EPS
0% $2.30 $1.15
20% $3.00 $1.80
40% $3.50 $2.80
60% $3.95 $3.95
80% $3.80 $5.53

Estimate the optimal debt ratio on the basis of the relationship between
Earnings per share and the debt ratio. You may find it helpful to graph the
relationship.

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Solution Summary

This solution shows step-by-step calculations to determine the CV of EPS and Price to determine the maximum EPS of debt ratio and share earnings. It also provides a suggestion on the optimal cap structure.

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