Corporate Finance - Starbucks Company Case - Capital Structure - Finance Assignment Help

Assignment Task:

Starstruck Company would like to determine its optimal capital structure. Several of its  managers believe that the best method is to rely on the estimated earnings per share (EPS) of  the firm because they feel that profits and stock price are closely related. The financial  managers have suggested another method that uses estimated required returns to estimate the  share value of the firm. The following financial data are available. 

Requirements: 

1. Regarding firm capital structure and the estimated EPS of the firm. What is the  optimal debt ratio?  

2. Regarding the capital structure and the estimated share value of the firm. What is  the optimal debt ratio?  

3. Do both methods lead to the same optimal capital structure? Which method do you  favor? Explain.  

4. What is the major difference between the EPS and share value methods? 

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