A company needs Rs 6,00,000 for the construction of a new plant. The following three financial plans are feasible:   

(a) The company may issue 60,000 equity shares of Rs 10 each.   

(b) The company may issue 30,000 equity shares of Rs 10 each and 3,000 debentures of Rs 100 each bearing an 8% coupon rate of interest.   

(c) The company may issue 30,000 equity shares of Rs 10 each and 3,000 preference shares of Rs 100 each bearing an 8% rate of dividend. The profit before interest and taxes (EBIT) is expected to be Rs 1,50,000, the corporate tax rate is 50%. 

Calculate the earnings per share under the three plans. Which plan would you recommend?

Answer rating: 100% (QA)

Solution1 STATEMENT SHOWING EARNING PER SHARE OF COMPANY UNDER DIFFERENT PROPOSAL Par... View the full answer