Answer to Question #194779 in Finance for Ankur Tiwari

Question

Empire Ltd. needs Rs. 10,00,000 to build a new factory will yield EBIT of Rs.1,50,000 year The company has to choose between two alternative financing plans : 75% Equity and 25% debt or 50% equity & 50% debt. Under the first plan shares can be sold at Rs. 50 per share and the interest rate on debt will be 14% . under the record plan the shares can be sold for Rs.40 per share and the interest rate on debt will be 16 percent. Determine EPS for each plant assuming a 50% tax rate

Answer 1

EPS is the profit per outstanding share of stock of a public company.

Computing EPS through excel:

Formula:

Result: