CA Intermediate · Financial Management and Strategic Management · Financing Decisions - Capital Structure
Meera Ltd has EBIT of ₹8,00,000 and 12% debentures of ₹20,00,000 outstanding. It has 1,00,000 equity shares. Using the EBIT-EPS approach and ignoring tax, what is its EPS?
Interest on the debentures is 12% of ₹20,00,000, which is ₹2,40,000. Deducting it from EBIT of ₹8,00,000 leaves ₹5,60,000 for equity holders. Dividing by 1,00,000 shares gives EPS of ₹5.60, since there is no tax.
- A₹5.60Correct
- B₹8.00
- C₹4.00
- D₹6.80
Explanation
Interest = 12% of 20,00,000 = ₹2,40,000. EBT = 8,00,000 - 2,40,000 = ₹5,60,000. EPS = 5,60,000 / 1,00,000 = ₹5.60. ₹8.00 ignores interest on the debentures.
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