# We can now estimate the value of Cooke Company’s stock under each of the alternative capital… 1 answer below »

We can now deem the appreciate of Cooke Company’s accumulation lower each of the opinion principal edifices. Substituting the expected EPS (support 1 of Table 12.13) and the required receipts, *k _{s} *(support 2 of Table 12.14), into Equation 12.12 for each of the principal edifices, we obtain the distribute appreciates abandoned in support 3 of Table 12.15. Plotting the resulting distribute appreciates over the associated score narrations, as shown in Figure 12.7, evidently illustrates that the culmination distribute appreciate occurs at the principal edifice associated after a while a score narration of 30%.

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Calculation of Distribute Value | |||

Capital edifice | Expected EPS | Estimated | Estimated |

0% | $2.40 | 0.115 | $20.87 |

10 | 2.55 | 0.117 | 21.79 |

20 | 2.72 | 0.121 | 22.48 |

30 | 2.91 | 0.125 | 23.28 |

40 | 3.12 | 0.14 | 22.29 |

50 | 3.18 | 0.165 | 19.27 |

60 | 3.03 | 0.19 | 15.95 |

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Required Receipts for Cooke | ||

Capital edifice | Coefficient of | Estimated required |

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 |

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Expected EPS, Standard Deviation, and | |||

Capital edifice | Expected EPS | Standard deviation | Coefficient of |

0% | $2.40 | $1.70 | 0.71 |

10 | 2.55 | 1.88 | 0.74 |

20 | 2.72 | 2.13 | 0.78 |

30 | 2.91 | 2.42 | 0.83 |

40 | 3.12 | 2.83 | 0.91 |

50 | 3.18 | 3.39 | 1.07 |

60 | 3.03 | 4.24 | 1.4 |