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A new project under consideration requires a capital outlay of Rs 300 Lakhs for which the funds can either be raised by Plan 1:issue of
A new project under consideration requires a capital outlay of Rs 300 Lakhs for which the funds can either be raised by Plan 1:issue of equity shares of Rs 300 Lakhs of Rs 100 each or Plan 2:issue of equity shares of Rs 200 Lakhs of Rs 100 each and by the issue of 15% loan of Rs 100 Lakhs. Find out the indifference level of EBIT given the tax rate at 50%. Also calculate Earnings per share for each plan and give your comment on the basis of the result obtained.
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