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EPS; total capital Rs 15,00,000

Short answer

Loan interest = Rs 72,000; EBT = Rs 228,000; tax at 20% = Rs 45,600; EAT = Rs 182,400; preference dividend = Rs 24,000; earnings for equity = Rs 158,400. With 4,000 shares, EPS = Rs 158,400 / 4,000 = Rs 39.60.

A company has total capital of Rs 1500000 which consists of Rs 400000 shares, Rs 200,000 preference share issued at 12% interest per year and the remaining loan issued @ 8% interest. Calculate EPS if earnings before interest and tax in a year is Rs 300,000 and tax rate is 20%.

Data

  • Share capital = Rs 4,00,000; assuming face value Rs 100 per share, number of shares = 4,000
  • Preference share = Rs 2,00,000 at 12%
  • Loan = 15,00,000 - 4,00,000 - 2,00,000 = Rs 900,000 at 8%
  • EBIT = Rs 3,00,000; tax = 20%
Interest=900,000×8%=72,000EBT=300,000−72,000=228,000Tax=20%×228,000=45,600EAT=228,000−45,600=182,400Preference dividend=200,000×12%=24,000Earnings for equity=182,400−24,000=158,400EPS=158,4004,000=39.60\begin{aligned} \text{Interest} &= 900,000 \times 8\% = 72,000\\ \text{EBT} &= 300,000 - 72,000 = 228,000\\ \text{Tax} &= 20\% \times 228,000 = 45,600\\ \text{EAT} &= 228,000 - 45,600 = 182,400\\ \text{Preference dividend} &= 200,000 \times 12\% = 24,000\\ \text{Earnings for equity} &= 182,400 - 24,000 = 158,400\\ EPS &= \frac{158,400}{4,000} = 39.60 \end{aligned}

Answer: EPS = Rs 39.60 per share (with shares of Rs 100 each).

✓ Answer checked by Claude Opus 5.5 (high effort)

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