39. Evergreen Company has the choice of raising the additional sum of Rs. 50 lacs either by the sale of 10 % percent debentures, or by issue of additional equity shares of Rs. 50 per share. structure of the company consists of 10 lacs ordinary shares and no debt. At what level of earnings before interest and tax (EBIT) after the new capital is acquired would earnings per share (EPS ) be the same, whether new funds are raised by issuing ordinary shares or by issuing debentures Assume 50% tax rate. The current Capitalization
39. Evergreen Company has the choice of raising the additional sum of Rs. 50 lacs either by the sale of 10 % percent debentures, or by issue of additional equity shares of Rs. 50 per share. structure of the company consists of 10 lacs ordinary shares and no debt. At what level of earnings before interest and tax (EBIT) after the new capital is acquired would earnings per share (EPS ) be the same, whether new funds are raised by issuing ordinary shares or by issuing debentures Assume 50% tax rate. The current Capitalization
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:39. Evergreen Company has the choice of raising the additional sum of Rs.
50 lacs either by the sale of 10 % percent debentures, or by issue of
additional equity shares of Rs. 50 per share. The current
structure of the company consists of 10 lacs ordinary shares and no debt.
At what level of earnings before interest and tax (EBIT) after the new capital
is acquired would earnings per share (EPS ) be the same, whether new
funds are raised by issuing ordinary shares or by issuing debentures Assume
50% tax rate .
Capitalization
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