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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.

    © BrainMass Inc. brainmass.com June 3, 2020, 9:04 pm ad1c9bdddf
    https://brainmass.com/business/weighted-average-cost-of-capital/eps-optimal-debt-ratio-164610

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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.

    $2.19

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