What is the EPS-EBIT indifference point

Assignment Help Accounting Basics
Reference no: EM132768750

Question - Maryland Limited's capital structure consists of Rs 60 crore worth of equity capital(Rs 10). The firm's current EBIT is 86 crore and interest is 16 crore.

The firm requires Rs. 200 crore of external financing for which it is considering two alternatives:

Alternative A: Issue of 1.6 crore equity shares of Rs 10 par at Rs. 125 each.

Alternative B: Issue of Rs.200 crore of debentures carrying 8 percent interest rate.

Tax rate is 30%.

Required -

What is the EPS-EBIT indifference point?

What is the EPS at this point?

Reference no: EM132768750

Questions Cloud

Flexible budget variance and static budget variance : Why is it important to healthcare providers? What is the difference between flexible budget variance and static budget variance?
Compute the unit product cost of one bike : Compute the unit product cost of one bike under absorption costing system. Fixed manufacturing overhead expenses: $1200,000
Prepare initial journal entries : The venue is year-round with 25 events days each month. Event bookings for the year totaled $1,260,000. Prepare initial journal entries
How does the policy account for any relevant ethical factors : Explain the policy and how it is designed to improve cost-effectiveness and health care equity for the population. Is the policy financially sound?
What is the EPS-EBIT indifference point : Alternative B: Issue of Rs.200 crore of debentures carrying 8 percent interest rate. What is the EPS-EBIT indifference point
Largest-percentage increases and decreases : What line items reflected the largest-percentage increases and/or decreases?
By what amount will the taxable income increase : Using the concept of financial leverage, by what % will the taxable income increase if EBIT increases by 6%
Organizational communication both positively and negatively : Analyze how the use of technology has impacted organizational communication both positively and negatively
Security management team for nuclear power plant : What are the benefits and limitations of your incident action plan? What are the pros and cons of handling this threat internally through private security alone

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd