M/s Nagu Ltd, has a share capital of $1,00,000 divided into 10,000 equity sharp-s of $10 each fully paid . It has a major expansion programme requiring an investment of another $50,000. The management is considering the following alternatives for raising this amount:

(a) Issue of 5,000 Equity shares of $10 each

(b) Issue of 5,000 12 % preferences shares of $10 each

(c) Issue of 10% Debentures of $50,000

The company present earnings before interest and taxes ( EBIT) Are $40,000 p.a. You are required to calculate the effect of each and above modes of financing of the EPS ( Earning Per Share ) assuming

1. EBIT continues to the same even after expansion.
2. EBIT increases by $ 10,000. Assume tax rate at 50%.