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Calculate earnings per share for plan

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Reference no: EM132484415

ABC Ltd. is considering two financing plans to raise Rs. 8,00,000. The key information is as follows:

Plan

Equity

Debt

Preference Shares

1

50%

50%

 

 2

50%

 

50%

  1. Expected EBIT is Rs. 2,40,000.
  2. Cost of Debt is 10% and cost of Preference Shares is 10%.
  3. Tax rate is 50%.

Equity shares of the face value of Rs. 10 each will be issued at a premium of Rs. 10 per share.

Question 1: Calculate Earnings per share for plan 1 and 2 and suggest which one is better.

Reference no: EM132484415

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