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EPS and book value; capital Rs 5,00,000

Short answer

Interest = Rs 21,000; EBT = Rs 79,000; tax (25%) = Rs 19,750; EAT = Rs 59,250; preference dividend = Rs 27,000; earnings for equity = Rs 32,250. EPS = Rs 32,250 / 2,000 = Rs 16.125 (≈16.13). Book value = Rs 2,00,000 / 2,000 = Rs 100.00.

A project has total capital of Rs 5,00,000 which consists of 2000 shares @ Rs 100, 1,50,000 preference share 18% interest and remaining loan @ 14% interest. Earning before interest and tax in a year is Rs 1,00,000. Calculate EPS and book value of share if tax rate is 25%.

Data

  • Ordinary shares: 2,000 x Rs 100 = Rs 2,00,000
  • Preference share = Rs 1,50,000 at 18%
  • Loan = 5,00,000 - 2,00,000 - 1,50,000 = Rs 1,50,000 at 14%
  • EBIT = Rs 1,00,000; tax = 25%

EPS

Interest=150,000×14%=21,000EBT=100,000−21,000=79,000Tax=25%×79,000=19,750EAT=79,000−19,750=59,250Preference dividend=150,000×18%=27,000Earnings for equity=59,250−27,000=32,250EPS=32,2502,000=16.125≈16.13\begin{aligned} \text{Interest} &= 150{,}000 \times 14\% = 21{,}000\\ \text{EBT} &= 100{,}000 - 21{,}000 = 79{,}000\\ \text{Tax} &= 25\% \times 79{,}000 = 19{,}750\\ \text{EAT} &= 79{,}000 - 19{,}750 = 59{,}250\\ \text{Preference dividend} &= 150{,}000 \times 18\% = 27{,}000\\ \text{Earnings for equity} &= 59{,}250 - 27{,}000 = 32{,}250\\ EPS &= \frac{32{,}250}{2{,}000} = 16.125 \approx 16.13 \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=200,0002,000=100.00BV = \frac{200{,}000}{2{,}000} = 100.00

Answer: EPS = Rs 16.125 per share (about Rs 16.13); book value = Rs 100.00 per share.

✓ Answer checked by Claude Opus 5.5 (high effort)

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