Calculate the indifference point for the plans

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Question 1: Debarathi Co. Ltd., is planning an expansion programme. It requires Rs 20 lakhs of external financing for which it is considering two alternatives. The first alternative calls for issu­ing 15,000 equity shares of Rs 100 each and 5,000 10% Preference Shares of Rs 100 each; the second alternative requires 10,000 equity shares of Rs 100 each, 2,000 10% Preference Shares of Rs 100 each and Rs 8,00,000 Debentures carrying 9% interest. The company is in the tax bracket of 50%. You are required to calculate the indifference point for the plans and verify your answer by calculating the EPS

Reference no: EM132497222

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