A Company earns a profit of ` 3,00,000 per annum after meeting its Interest liability

of ` 1,20,000 on 12% debentures The Tax rate is 50%. The number of Equity

Shares of ` 10 each ore 80,000 and the retained earnings amount to 112,00,000.

The company proposes to take up an expansion scheme tor which a sum of

` 4,00,000 is required. It is anticipated that after expansion, the company will be

able to achieve the same return on investment as at present. The funds required for

expansion can be raised either through debt at the rate of 12% or by issuing Equity

Shares at par Required:

(i) Compute the Earnings Per Share (EPS), if:

- the additional funds were raised as debt

- the additional funds were raised by issue of equity shares,