Consider the following information:

Firms Existing Project: Total Asset 10000000, Debt/equity 60%/40%

The firm is going to invest in new project which needs another 1 crore. Now there are 3 method of financing available.

1. Fully by Common stock capital of 100 par value

2. Fully by 12% debt capital

3. 50% by common stock capital and 50% by debt capital.

4. The expected operating profit margin is 40% and corporate tax rate is 25%

EBIT = Total: Revenue - Cost: of: Goods: Sold - Operating: Expenses.

Requirement:

1. Find the EPS under each method of Financing and What will be the indifference point of EBIT and explain the implication.?