Question
Omax Limiteds present capital structure consists of 20 million equity shares of Rs. 10 each. It requires Rs. 100 million of additional financing. It is
Omax Limiteds present capital structure consists of 20 million equity shares of Rs. 10 each. It requires Rs. 100 million of additional financing. It is considering two alternatives: Alternative 1 : Issue of 3 million equity shares of Rs. 10 par at Rs. 20 each and 4 million preference shares of Rs.10 par, carrying a dividend rate of 10 percent. Alternative 2 : Issue of 4 million equity shares of Rs. 10 par at Rs. 20 each and debentures for Rs. 20 million carrying an interest rate of 11 percent. The companys tax rate is 33 percent? What is the EPS-EBIT indifference point?
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