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A company has EBIT of 48,00,000 and its capital structure consists of the following securities .a) Equity share capital (rupees 10 each) - 40,00,000. b) 12% preference share capital-60,00,000. c) 15% debentures -1,00,00,000 .The company facing fluctuation in sales.what would be the changes in EPS? a) If EBIT of the company increased by 25% ? b) If EBIT of the company decreased by 25%?. The corporate tax rate is 40%.?
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A company has EBIT of 48,00,000 and its capital structure consists of ...
Calculation of EPS with changes in EBIT

Given:

  • EBIT = Rs. 48,00,000

  • Equity share capital = Rs. 40,00,000

  • 12% preference share capital = Rs. 60,00,000

  • 15% debentures = Rs. 1,00,00,000

  • Corporate tax rate = 40%



Calculation of Earnings available to equity shareholders:

  • EBIT = Rs. 48,00,000

  • Interest on debentures = Rs. 15,00,000 (15% of Rs. 1,00,00,000)

  • EBT = EBIT - Interest on debentures = Rs. 33,00,000

  • Taxes = Rs. 13,20,000 (40% of EBT)

  • Net profit available to equity shareholders = EBT - Taxes = Rs. 19,80,000



Calculation of EPS:

  • Number of equity shares = Rs. 40,00,000 / Rs. 10 = 4,00,000

  • EPS = Net profit available to equity shareholders / Number of equity shares

  • EPS = Rs. 19,80,000 / 4,00,000 = Rs. 4.95



Calculation of EPS with increase in EBIT by 25%:

  • New EBIT = Rs. 60,00,000 (25% increase in EBIT)

  • Interest on debentures = Rs. 15,00,000 (constant)

  • New EBT = New EBIT - Interest on debentures = Rs. 45,00,000

  • Taxes = Rs. 18,00,000 (40% of New EBT)

  • New net profit available to equity shareholders = New EBT - Taxes = Rs. 27,00,000



Calculation of new EPS:

  • New EPS = New net profit available to equity shareholders / Number of equity shares

  • New EPS = Rs. 27,00,000 / 4,00,000 = Rs. 6.75



Calculation of EPS with decrease in EBIT by 25%:

  • New EBIT = Rs. 36,00,000 (25% decrease in EBIT)

  • Interest on debentures = Rs. 15,00,000 (constant)

  • New EBT = New EBIT - Interest on debentures = Rs. 21,00,000

  • Taxes = Rs. 8,40,000 (40% of New EBT)

  • New net profit available to equity shareholders = New EBT - Taxes = Rs. 12,60,000



Calculation of new EPS:

  • New EPS
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A company has EBIT of 48,00,000 and its capital structure consists of the following securities .a) Equity share capital (rupees 10 each) - 40,00,000. b) 12% preference share capital-60,00,000. c) 15% debentures -1,00,00,000 .The company facing fluctuation in sales.what would be the changes in EPS? a) If EBIT of the company increased by 25% ? b) If EBIT of the company decreased by 25%?. The corporate tax rate is 40%.?
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A company has EBIT of 48,00,000 and its capital structure consists of the following securities .a) Equity share capital (rupees 10 each) - 40,00,000. b) 12% preference share capital-60,00,000. c) 15% debentures -1,00,00,000 .The company facing fluctuation in sales.what would be the changes in EPS? a) If EBIT of the company increased by 25% ? b) If EBIT of the company decreased by 25%?. The corporate tax rate is 40%.? 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 A company has EBIT of 48,00,000 and its capital structure consists of the following securities .a) Equity share capital (rupees 10 each) - 40,00,000. b) 12% preference share capital-60,00,000. c) 15% debentures -1,00,00,000 .The company facing fluctuation in sales.what would be the changes in EPS? a) If EBIT of the company increased by 25% ? b) If EBIT of the company decreased by 25%?. The corporate tax rate is 40%.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company has EBIT of 48,00,000 and its capital structure consists of the following securities .a) Equity share capital (rupees 10 each) - 40,00,000. b) 12% preference share capital-60,00,000. c) 15% debentures -1,00,00,000 .The company facing fluctuation in sales.what would be the changes in EPS? a) If EBIT of the company increased by 25% ? b) If EBIT of the company decreased by 25%?. The corporate tax rate is 40%.?.
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