---
title: "EPS and book value; Rs 10,00,000, 3500 shares"
subject: "Project Engineering"
chapter: 6
key: "semester_7/project_engineering:eps-bv-capital-1000000-3500-shares"
source: https://www.bctengineer.com/q/semester_7/project_engineering/eps-bv-capital-1000000-3500-shares
site: BCT Engineering
---

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

Project Engineering · Chapter 6: Introduction to Project Financing

- Asked in: 2078 Bhadra, 4 marks
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/project_engineering/eps-bv-capital-1000000-3500-shares
- Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-6

## Question

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%.

## 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.

## Answer

#### 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

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

#### 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).

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

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

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. How are the ordinary shares' capital found and checked?
   A. 3,500 x Rs 100 = Rs 3,50,000, and 3,50,000 + 4,00,000 + 2,50,000 = Rs 10,00,000
   B. 10,00,000 - 4,00,000 = Rs 6,00,000
   C. 3,500 x Rs 10 = Rs 35,000
   D. Rs 2,50,000 x 3,500
   Answer: A. Share capital is 3,500 x 100 = 3,50,000 and the three components add up to the total capital. (Key point: Checking capital structure)

2. What are interest and EBT?
   A. Interest Rs 48,000; EBT Rs 7,52,000
   B. Interest Rs 25,000; EBT Rs 7,75,000
   C. Interest Rs 40,000; EBT Rs 7,60,000
   D. Interest Rs 25,000; EBT Rs 7,75,000 after preference dividend
   Answer: B. Interest = 10% x 2,50,000 = 25,000; EBT = 8,00,000 - 25,000 = 7,75,000. The preference dividend is not deducted before tax. (Key point: Interest and EBT)

3. What are the earnings available for ordinary shareholders?
   A. Rs 6,20,000
   B. Rs 5,72,000
   C. Rs 7,27,000
   D. Rs 7,75,000 - 48,000 = Rs 7,27,000
   Answer: B. EAT = 7,75,000 x 0.8 = 6,20,000; minus preference dividend 48,000 (12% x 4,00,000) = Rs 5,72,000. (Key point: Earnings for equity)

4. What are EPS and book value per share?
   A. EPS Rs 163.43; BV Rs 100
   B. EPS Rs 177.14; BV Rs 100
   C. EPS Rs 163.43; BV Rs 285.71
   D. EPS Rs 100; BV Rs 163.43
   Answer: A. EPS = 5,72,000/3,500 = 163.43; BV = 3,50,000/3,500 = 100 because only ordinary capital counts as net worth. (Key point: EPS and book value)

## Related in Project Engineering

- [EPS and book value; capital Rs 5,00,000](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aeps-bv-capital-500000-2000-shares) — Project Engineering, chapter 6
- [EPS and book value; ABC project Rs 6,00,000](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aeps-bv-abc-project-600000-b79) — Project Engineering, chapter 6
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