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Academic MBA Question:

Question: Assume that ABC Ltd has equity share capital of 15,00,000 divided into shares of Rs150 each. The company wishes to raise additional total capital of 6,00,000 for expansion through 3,00,000 in equity shares and 3,00,000 in debts at 10%. The EBIT of the company is 3,00,000 and tax rate are 50%. Calculate EPS. Suggest what will happen to EPS if entire capital was raised through debts.


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