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The Management of Tanjung Uda Berhad is planning a RM4,000,000 expansion this year. The expansion can be financed by issuing either common shares of bonds.
The Management of "Tanjung Uda Berhad" is planning a RM4,000,000 expansion this year. The expansion can be financed by issuing either common shares of bonds. The new common share can be sold for RM\$\$ per share. The bonds can be issued with a 12% coupon rates. The firm's existing preference share pay dividends of RM\$2 per share. The company's corporate income tax is 30%. The financial statement of Tanjung Uda Berhad is as follow:- a) Calculate the indifference level of EBIT between the two Plans. b) If EBIT is Expected to be RM1,500,000 which plan will result in a high EPS
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