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Problem 7: The existing capital structure of ABC ltd is as follows: Equity shares of. Rs. 200 each Rs. 3000000 Retained earnings Rs. 750000 10% Preference shares Rs. 1875000 8% Debentures Rs. 1875000 The company earns 12% on capital. The income tax rate is 40%. The company wants to raise Rs. 1875000 for its expansion project for which it is considering following alternatives: a. Issue of 15000 equity shares at a premium of Rs. 125 per share b. Issue of 7% Preference shares c. Issue of 9% Debentures. Calculate earnings per share and market price per share

Problem 7: The existing capital structure of ABC ltd is as follows: Equity shares of. Rs. 200 each Rs. 3000000 Retained earnings Rs. 750000 10% Preference shares Rs. 1875000 8% Debentures Rs. 1875000 The company earns 12% on capital. The income tax rate is 40%. The company wants to raise Rs. 1875000 for its expansion project for which it is considering following alternatives: a. Issue of 15000 equity shares at a premium of Rs. 125 per share b. Issue of 7% Preference shares c. Issue of 9% Debentures. Calculate earnings per share and market price per share

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 7: The existing capital structure of ABC ltd is as follows: Equity shares of. Rs. 200 each Rs. 3000000 Retained earnings Rs. 750000 10% Preference shares Rs. 1875000 8% Debentures Rs. 1875000 The company earns 12% on capital. The income tax rate is 40%. The company wants to raise Rs. 1875000 for its expansion project for which it is considering following alternatives: a. Issue of 15000 equity shares at a premium of Rs. 125 per share b. Issue of 7% Preference shares c. Issue of 9% Debentures. Calculate earnings per share and market price per share
Transcribed Image Text:Problem 7: The existing capital structure of ABC ltd is as follows: Equity shares of. Rs. 200 each Rs. 3000000 Retained earnings Rs. 750000 10% Preference shares Rs. 1875000 8% Debentures Rs. 1875000 The company earns 12% on capital. The income tax rate is 40%. The company wants to raise Rs. 1875000 for its expansion project for which it is considering following alternatives: a. Issue of 15000 equity shares at a premium of Rs. 125 per share b. Issue of 7% Preference shares c. Issue of 9% Debentures. Calculate earnings per share and market price per share
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