Determine the earning per share in each plan

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A Ltd. Company has equity shares capital of Rs. 500000 dividend into shares of Rs. 100 each, it wishes to raise further Rs. 300000 for expansion cum modernisation plans. The company plans the following financing schemes:

1) All equity stock

2) Rs. 100000 in equity shares and Rs

3) 200000 in 10% debentures.

4) Al debt at 10% per annum

5) Rs. 100000 in equity shares and Rs. 200000 in preference capital with the rate is dividend at 8%.

The company's existing earnings before interest and tax(EBIT) is Rs. 150000. The corporate rate of tax is 50%.

Problem 1: You are required to determine the earning per share in each plan and comment on the implication of financial leverage.

Reference no: EM132640809

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