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EPS and book value; Rs 10,00,000, 3500 shares

Short answer

Interest = Rs 25,000; EBT = Rs 7,75,000; tax (20%) = Rs 1,55,000; EAT = Rs 6,20,000; preference dividend = Rs 48,000; earnings for equity = Rs 5,72,000. EPS = Rs 5,72,000 / 3,500 = Rs 163.43. Book value = Rs 3,50,000 / 3,500 = Rs 100.00.

A project has total capital of Rs 10,00,000 which consists of Rs 4,00,000 preference share @ 12%, Rs 2,50,000 debt @ 10% and 3500 ordinary shares @ Rs 100. If the earnings before interest and tax is Rs 8,00,000, determine EPS and book value of share if the tax rate applicable is 20%.

Data

  • Ordinary shares: 3,500 x Rs 100 = Rs 350,000
  • Preference share = Rs 4,00,000 at 12%
  • Debt = Rs 2,50,000 at 10%
  • Total = 3,50,000 + 4,00,000 + 2,50,000 = Rs 10,00,000 (checks)
  • EBIT = Rs 8,00,000; tax = 20%

EPS

Interest=250,000×10%=25,000EBT=800,000−25,000=775,000Tax=20%×775,000=155,000EAT=775,000−155,000=620,000Preference dividend=400,000×12%=48,000Earnings for equity=620,000−48,000=572,000EPS=572,0003,500=163.43\begin{aligned} \text{Interest} &= 250,000 \times 10\% = 25,000\\ \text{EBT} &= 800,000 - 25,000 = 775,000\\ \text{Tax} &= 20\% \times 775,000 = 155,000\\ \text{EAT} &= 775,000 - 155,000 = 620,000\\ \text{Preference dividend} &= 400,000 \times 12\% = 48,000\\ \text{Earnings for equity} &= 620,000 - 48,000 = 572,000\\ EPS &= \frac{572,000}{3,500} = 163.43 \end{aligned}

Book value

Book value per share = net worth belonging to ordinary shareholders / number of ordinary shares. No reserves or retained earnings are given, so net worth equals the ordinary share capital (preference capital and loan are not part of it).

BV=350,0003,500=100.00BV = \frac{350,000}{3{,}500} = 100.00

Answer: EPS = Rs 163.43 per share; book value = Rs 100.00 per share.

✓ Answer checked by Claude Opus 5.5 (high effort)

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