Empire Ltd. needs Rs. 10,00,000 to build a new factory will yield EBIT of Rs.1,50,000 year The company has to choose between two alternative financing plans : 75% Equity and 25% debt or 50% equity & 50% debt. Under the first plan shares can be sold at Rs. 50 per share and the interest rate on debt will be 14% . under the record plan the shares can be sold for Rs.40 per share and the interest rate on debt will be 16 percent. Determine EPS for each plant assuming a 50% tax rate
Empire Ltd. needs Rs. 10,00,000 to build a new factory will yield EBIT of Rs.1,50,000 year The company has to choose between two alternative financing plans : 75% Equity and 25% debt or 50% equity & 50% debt. Under the first plan shares can be sold at Rs. 50 per share and the interest rate on debt will be 14% . under the record plan the shares can be sold for Rs.40 per share and the interest rate on debt will be 16 percent. Determine EPS for each plant assuming a 50% tax rate
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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Empire Ltd. needs Rs. 10,00,000 to build a new factory will yield EBIT of Rs.1,50,000 year The company has to choose between two alternative financing plans : 75% Equity and 25% debt or 50% equity & 50% debt. Under the first plan shares can be sold at Rs. 50 per share and the interest rate on debt will be 14% . under the record plan the shares can be sold for Rs.40 per share and the interest rate on debt will be 16 percent. Determine EPS for each plant assuming a 50% tax rate
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