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What should be choice of the company

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Reference no: EM132528692

A company requires capital funds of Rs. 5 crores and has two options:

(i) To raise the amount by the issue of 15% debentures, and

(ii) To issue equity shares at a rate of Rs. 20 per share.

  • It already has 40 lacs equity shares issued and debt financing of Rs. 6 crores at the rate of 12%.

Question 2: Find out the expected EPS under both financing options at the given EBIT levels of Rs. 2 crores and Rs. 7.5 crores. What should be choice of the company given that the applicable tax rate is 50%?

Reference no: EM132528692

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