Howard Company is considering three financing plans: all equity; 60 per cent equity and 40 per centdebt; and 40 per cent equity and 60 per cent debt. Total funds needed are Rs 300,000. EBIT is expectedto be Rs 45,000. Shares can be sold at the rate of Rs 20 per cent share. Funds can be borrowed asfollows: up to and including Rs 60,000 at 14 per cent; Rs 60,000 to Rs 150,000 at 16 per cent and overRs 150,000 at 18 per cent. Compute the EPS of each plan. Assume a tax rate of 35 per cent.

Answer rating: 100% (QA)

To compute the earnings per share EPS for each financing plan we need to calculate the earnings available to common shareholders for each plan and the... View the full answer