Annual Sales for the year 2021 was Rs 30 crore & its EBIT was Rs 3 crore. Capital structure consisted of 5,00,000 equity shares of Rs 100 each, Rs 2 Crore preference shares at a rate of dividend of 10% and Rs 4 Crore, 8% debentures. Assume tax rate as 35%.  (i) Calculate the current EPS.  (ii) Company wants additional capital of Rs 8 crore and has two plans-  (a) Issue 125000 equity shares of Rs 100 at Rs 60 premium and raise a debt for the balance at 9.5% interest rate per annum.  (b) Raise the entire requirement by issuing equity shares of Rs 100 each at Rs 60 premium. Calculate

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Annual Sales for the year 2021 was Rs 30 crore & its EBIT was Rs 3 crore. Capital structure consisted of 5,00,000 equity shares of Rs 100 each, Rs 2 Crore preference shares at a rate of dividend of 10% and Rs 4 Crore, 8% debentures. Assume tax rate as 35%. 

(i) Calculate the current EPS. 

(ii) Company wants additional capital of Rs 8 crore and has two plans- 

(a) Issue 125000 equity shares of Rs 100 at Rs 60 premium and raise a debt for the balance at 9.5% interest rate per annum. 

(b) Raise the entire requirement by issuing equity shares of Rs 100 each at Rs 60 premium. Calculate the indifference point between the two plans. Comment on the values of EPS at indifference point for both capital structure.

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