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X co. Ltd has issued capital of Rs. 5,00,000/- divided into equity shares of Rs. 100 each. The Co plans to raise new capital of Rs 3,00,000/-. The Co has three plans available which are as follows 1. Issued of 10% debentures worth Rs. 2,00,000/- and equity shares of Rs. 1,00,000/- 2. Issued of 10% debentures worth Rs. 3,00,000/- 3. Issue of equity shares Rs. 3,00,000/- EBIT Rs. 1,50,000/, and applicable Corporate tax is @50%. Find most financially leverage year?
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X co. Ltd has issued capital of Rs. 5,00,000/- divided into equity sha...
Most Financially Leveraged Year for X Co. Ltd

X Co. Ltd plans to raise new capital of Rs. 3,00,000/- and has three options available. In order to find the most financially leveraged year, we need to calculate the interest and tax implications of each plan.

Plan 1: 10% Debentures worth Rs. 2,00,000/- and Equity Shares of Rs. 1,00,000/-

- Interest on debentures = 10% of Rs. 2,00,000/- = Rs. 20,000/-
- EBIT - Interest = Rs. 1,50,000/- - Rs. 20,000/- = Rs. 1,30,000/-
- Tax @50% = Rs. 65,000/-
- Earnings available for Equity Shareholders = Rs. 65,000/- + Rs. 1,00,000/- = Rs. 1,65,000/-

Plan 2: 10% Debentures worth Rs. 3,00,000/-

- Interest on debentures = 10% of Rs. 3,00,000/- = Rs. 30,000/-
- EBIT - Interest = Rs. 1,50,000/- - Rs. 30,000/- = Rs. 1,20,000/-
- Tax @50% = Rs. 60,000/-
- Earnings available for Equity Shareholders = Rs. 60,000/-

Plan 3: Issue of Equity Shares of Rs. 3,00,000/-

- EBIT = Rs. 1,50,000/-
- Tax @50% = Rs. 75,000/-
- Earnings available for Equity Shareholders = Rs. 75,000/-

Most Financially Leveraged Year

Based on the above calculations, the most financially leveraged year for X Co. Ltd is Plan 1, i.e. Issuance of 10% Debentures worth Rs. 2,00,000/- and Equity Shares of Rs. 1,00,000/-. This plan provides the highest earnings available for equity shareholders at Rs. 1,65,000/-. Plan 2 and Plan 3 have lower earnings available for equity shareholders at Rs. 60,000/- and Rs. 75,000/- respectively.
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X co. Ltd has issued capital of Rs. 5,00,000/- divided into equity shares of Rs. 100 each. The Co plans to raise new capital of Rs 3,00,000/-. The Co has three plans available which are as follows 1. Issued of 10% debentures worth Rs. 2,00,000/- and equity shares of Rs. 1,00,000/- 2. Issued of 10% debentures worth Rs. 3,00,000/- 3. Issue of equity shares Rs. 3,00,000/- EBIT Rs. 1,50,000/, and applicable Corporate tax is @50%. Find most financially leverage year?
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X co. Ltd has issued capital of Rs. 5,00,000/- divided into equity shares of Rs. 100 each. The Co plans to raise new capital of Rs 3,00,000/-. The Co has three plans available which are as follows 1. Issued of 10% debentures worth Rs. 2,00,000/- and equity shares of Rs. 1,00,000/- 2. Issued of 10% debentures worth Rs. 3,00,000/- 3. Issue of equity shares Rs. 3,00,000/- EBIT Rs. 1,50,000/, and applicable Corporate tax is @50%. Find most financially leverage year? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about X co. Ltd has issued capital of Rs. 5,00,000/- divided into equity shares of Rs. 100 each. The Co plans to raise new capital of Rs 3,00,000/-. The Co has three plans available which are as follows 1. Issued of 10% debentures worth Rs. 2,00,000/- and equity shares of Rs. 1,00,000/- 2. Issued of 10% debentures worth Rs. 3,00,000/- 3. Issue of equity shares Rs. 3,00,000/- EBIT Rs. 1,50,000/, and applicable Corporate tax is @50%. Find most financially leverage year? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for X co. Ltd has issued capital of Rs. 5,00,000/- divided into equity shares of Rs. 100 each. The Co plans to raise new capital of Rs 3,00,000/-. The Co has three plans available which are as follows 1. Issued of 10% debentures worth Rs. 2,00,000/- and equity shares of Rs. 1,00,000/- 2. Issued of 10% debentures worth Rs. 3,00,000/- 3. Issue of equity shares Rs. 3,00,000/- EBIT Rs. 1,50,000/, and applicable Corporate tax is @50%. Find most financially leverage year?.
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