The finance manager of the ITC Limited has approved a proposal of expanding the product

line and introduce milk and milk products from the brand ITC. The operations department

has submitted a detailed project report with an amount of investment required for project

at Rs. 90,00,00,000. The additional CFO of the firm has given two proposals of funding

the project. The first proposal being 2/3rd of the required funds will be in the form of equity

and 1/3rd of the required funds as debentures at a rate of interest of 10%. Whereas in the

second proposal, the funds will be 1/3rd of the required funds will be from 13% preference

capital, 40% of the required funds as equity and the balance in the form of 10% debentures.

The company is in the 35 per cent corporate tax and the face value of equity shares of the

firm is Rs. 10. The Board of Directors of the firm has asked the management trainee to

work out an EPS at which both will break even. Please cross check before you submit the

details to the BoD.