Academic MBA Question:
Q1. ABC Ltd. is considering two financing plans to raise Rs. 8,00,000. The key information is as follows:
Expected EBIT is Rs. 2,40,000.
Cost of Debt is 10% and cost of Preference Shares is 10%.
Tax rate is 50%.
Equity shares of the face value of Rs. 10 each will be issued at a premium of Rs. 10 per share.
Calculate Earnings per share for plan 1 and 2 and suggest which one is better.
Academic Assignment Answer: