20. A company having equity share capital of `4,00,000 divided into shares of `100 each. The company wants to raise additional fund of `2,00,000 for its diversification programme.

Company has the following alternatives for raising the fund:

Plan A: Issue of 20,000 equity shares of 100 each Plan B: Issue of 20,000 preference shares of 100 each Plan C: Issue of 10% debentures of `100 each The expected current EBIT level of the company in the present scenario is `1,00,000. The EBIT will change according to general economic conditions given as follows:

Good conditions: EBIT `1,20,000 Bad conditions: EBIT `80,000 Calculate EPS in all the cases and analyse the results. Assume tax rate of 50%.

Existing plan Plan A Plan B Plan C EBIT of 1,00,000 12.5 8.33 6.5 10 EBIT of 1,20,000 12.5 10 9 12.5 EBIT of 80,000 12.5 6.67 4 7.5