---
title: "EPS and book value; capital Rs 5,00,000"
subject: "Project Engineering"
chapter: 6
key: "semester_7/project_engineering:eps-bv-capital-500000-2000-shares"
source: https://www.bctengineer.com/q/semester_7/project_engineering/eps-bv-capital-500000-2000-shares
site: BCT Engineering
---

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

Project Engineering · Chapter 6: Introduction to Project Financing

- Asked in: 2070 Asar, 4+4 marks
- Video: [Financial management under BU// chapter 3// calculation of EPS when 2 different EBIT amt// part 6](https://www.youtube.com/watch?v=jlRm2qOwlWs) — study circle
- 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-500000-2000-shares
- Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-6

## Question

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%.

## 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.

## Answer

#### 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

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

#### 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).

$$
BV = \frac{200{,}000}{2{,}000} = 100.00
$$

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

## Check yourself

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

1. What is the loan in this project?
   A. Rs 1,50,000
   B. Rs 2,00,000
   C. Rs 3,00,000
   D. Rs 3,50,000
   Answer: A. 5,00,000 - 2,00,000 (shares) - 1,50,000 (preference) = Rs 1,50,000. (Key point: Loan amount)

2. On which amount is the 25% tax computed?
   A. EBIT of Rs 1,00,000
   B. EBT of Rs 79,000 (EBIT less interest of Rs 21,000)
   C. EAT of Rs 59,250
   D. Earnings for equity after preference dividend
   Answer: B. Interest is tax deductible, so tax = 25% x 79,000 = Rs 19,750. (Key point: Tax is charged on EBT)

3. How is the preference dividend treated in the EPS calculation?
   A. Deducted before tax like interest
   B. Deducted from EAT because it is paid after tax
   C. Ignored because preference holders are not owners
   D. Added to EAT
   Answer: B. Preference dividend (18% x 1,50,000 = 27,000) comes out of EAT to give earnings for equity of Rs 32,250. (Key point: Preference dividend)

4. What is the EPS?
   A. Rs 29.63
   B. Rs 16.12 (about)
   C. Rs 13.50
   D. Rs 100
   Answer: B. 32,250 / 2,000 = 16.125, about Rs 16.12. (Key point: EPS value)

## Related in Project Engineering

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- [EPS and book value; \$1,000,000 capital](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aeps-bv-dollar-1000000-4000-shares) — Project Engineering, chapter 6

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