Question
Zippy Pasta Corporation (ZPC) has a constant growth rate of 7 percent. The company retains 30 percentof its earnings to fund future growth. ZPCs expected
Zippy Pasta Corporation (ZPC) has a constant growth rate of 7 percent. The company retains 30 percentof its earnings to fund future growth. ZPCs expected EPS (EPS1) and ks for various capital structures aregiven below. What is the optimal capital structure for ZPC?
Debt/Total Assets Expected EPS ks20% RM2.50 15.0% 30 3.00 15.5 40 3.25 16.0 50 3.75 17.0 70 4.00 18.0
answer
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Case Studies in Finance Managing for Corporate Value Creation
Authors: Robert F. Bruner, Kenneth Eades, Michael Schill
7th edition
007786171X, 77861711, 978-0077861711
