Answer to Question #292888 in Economics for Bhawna

Question

Tata Steel Ltd has equity share capital of Rs. 50,00,000 (Face value

Rs.100) and 10% Debentures of Rs. 50,00,000.To meet the expenditure

program, the company wishes to raise Rs. 30,00,000 and is having the

following two alternative sources to raise the funds:

Plan A : To have full money from the issue of Equity shares.

Plan B: To have Rs. 15,00,000 from equity shares issued and

Rs.15,00,000 from borrowings from the financial institutions @10%

The company is having present earing’s of Rs.16,50,000 . The corporate

tax is 40%.New equity shares will be issued at Rs. 120 per share.

(i)Find out the EPS and select a suitable plan out of the above two

planes to raise the required funds.

(ii)Find out the indifference level of EBIT between Plan A and Plan B

Answer 1

It's been a while since this question is posted here. Still, the answer hasn't been got. Consider converting this question to a fully qualified assignment, and we will try to assist. Please click the link below to proceed: Submit order