Calculate the break-even ebit

Reference no: EM1344419

lashi and hsipaw railways ltd is currently unlevered,i.e. it has 100% equity and no debt. there are 1000000 shares on issue with a market value of 10 each. the company is planning to buy 30% of its shares by borrowing at 10% p.a. next year EBIT is predicted to be 2000000. the corporate tax rate is 30%.
note; EBIT= earning before interest and tax

a) What is the earning per share for each type of capital structure given the predicted EBIT?

b) Calculate the break-even EBIT?

c) Draw a graph of EBIT versus EPS (with EBIT on horizontal axis and EPS on the vertical axis)m labelling both axes clearly and labelling any lines on the graph clearly?

Reference no: EM1344419

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