Krishna Enterprises Ltd is considering different methods to finance its expansion proposal. Estimated funds required are ₹ 60,00,000. Two alternative methods are available for raising the funds: I To raise ₹ 60,00,000 by issuing Equity Shares of ₹100 each , II To raise ₹ 25,00,0000 by issuing Equity Shares of ₹ 100 each and ₹ 35,00,000 through Term Loan @ 10% interest per annum. The existing capital structure of the company consists of 20,000 equity shares of ₹ 100 each and the expected
Krishna Enterprises Ltd is considering different methods to finance its expansion proposal. Estimated funds required are ₹ 60,00,000. Two alternative methods are available for raising the funds: I To raise ₹ 60,00,000 by issuing Equity Shares of ₹100 each , II To raise ₹ 25,00,0000 by issuing Equity Shares of ₹ 100 each and ₹ 35,00,000 through Term Loan @ 10% interest per annum. The existing capital structure of the company consists of 20,000 equity shares of ₹ 100 each and the expected
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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Krishna Enterprises Ltd is considering different methods to finance its expansion proposal. Estimated funds required are ₹ 60,00,000. Two alternative methods are available for raising the funds:
I To raise ₹ 60,00,000 by issuing Equity Shares of ₹100 each ,
II To raise ₹ 25,00,0000 by issuing Equity Shares of ₹ 100 each and ₹ 35,00,000 through Term Loan @ 10% interest per annum.
The existing capital structure of the company consists of 20,000 equity shares of ₹ 100 each and the expected EBIT (Earnings before interest and tax) is ₹ 11,40,000. Corporate tax rate is 25%, Advise the company on the basis of EPS in each alternative.
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