Question

ABC Ltd. is considering two financing plans to raise ₹ 8, 00,000. The key information is...

ABC Ltd. is considering two financing plans to raise ₹ 8, 00,000. The key information is as follows:

TABLE GIVEN BELOW:

Plan 1 Equity+Debt= 150%+50%

Plan 2 Equity+ Preference Shares= 250%+50%

Expected EBIT is ₹ 2, 40,000. Cost of Debt is 10% and cost of Preference Shares is 10%. Tax rate is 50%. Equity shares of the face value of ₹ 10 each will be issued at a premium of ₹ 10 per share.

Calculate Earnings per share for plan 1 and 2 and suggest which one is better.

Answer in 1200 words with proper Introduction, Concepts, and Application related to the question and Conclusion

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