Skyline Software Ltd has appointed you as its finance manager. The company wants to implement a project for which Rs 30 lakh is required to be raised from the market as a means of financing the project. The following financing plans and options are at hand: (Number in thousands)

 

Assuming corporate tax to be 35 percent and the face value of all the shares and debentures to be Rs 100 each, calculate the indifference points and earnings per share (EPS) for each of the financing plans. Which plan should be accepted by the company?

 

Particulars Plan A Plan B Plan C Option 1: Equity shares 30 30 30 Option 2: Equity shares 15 20 10 12% Preference shares Nil 10 10 10% Non-convertible debentures 15 Nil 10