# 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, ks (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%.

 TABLE 12.15 Calculation of Distribute ValueEstimates Associated after a whileAlternative Principal Structuresfor Cooke Company Capital edificescore narration Expected EPS(from support 1of Table 12.13)(1) Estimatedrequired retaliate, ks(from support 2of Table 12.14)(2) Estimateddistribute appreciate[(1) ÷ (2)](3) 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

 TABLE 12.14 Required Receipts for CookeCompany’s AlternativeCapital Structures Capital edificescore narration Coefficient ofvariation of EPS(from support 3of Table 12.13)(1) Estimated requiredreturn, 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

 TABLE 12.13 Expected EPS, Standard Deviation, andCoefficient of Variation for AlternativeCapital Structures for Cooke Company Capital edificescore narration Expected EPS(1) Standard deviationof EPS(2) Coefficient ofvariation of EPS[(2) x (1)](3) 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