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A company needs 3125000 INR for construction of new plant. The following are 2 feasible options: -a) company may issue 312500 equity share at 10 each b) company may issue 156250 ordinary equity shares at 10 each and debenture of 15625 at 100 each bearing 8% intrest . Corporate Tax is 40% , calculate indifference point

April 09, 2020

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Financiang alternative for obtaining the requisite amount of 20cr. Are as under:- Alternative I : Equity shares can be issued at 10 each with a premium of 40 each Share issue expenses as also under pricing of the issue in comparison to ruling market price result in net proceed of 40 each for every new share issued. Alternative II:- company can borrow the requisite amount at 15% intrest per year. the company decide to borrow 10 cr. at 15% rate of intrest per year and the balance amount obtained by share issue at par terms indicate in the first alternative. How many shares are requitred to be issued.

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Skyline software limited wants to implement a project for which 30 lakh is required. Following financing optionsOption one equity share 30000, option 2 equity share 10000, 12% preference share -10000, 10% debenture 10000. calculate the indifference point , EPS at all level and EBIT assuming corporate tax 35 %

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