Cooke Company, using as risk measures the coefficients of variation of EPS associated with each of…


Cooke Company, using as abandon measures the coefficients of departure of EPS associated delay each of the seven resource consummate structures, estimated the associated required produces. These are shown in Table 12.14. As expected, the estimated

TABLE 12.14

Required Returns for Cooke
Company’s Alternative
Capital Structures

Capital structure
debt ratio

Coefficient of
departure of EPS
(from post 3
of Table 12.13)
(1)

Estimated required
return, ks
(2)

0%

0.71

11.50%

10

0.74

11.7

20

0.78

12.1

30

0.83

12.5

40

0.91

14

50

1.07

16.5

60

1.4

19

required produce of owners, ks, increases delay increasing abandon, as measured by the coefficient of departure of EPS.