Emerald Ltd is planning an expansion programme which wi

Emerald Ltd is planning an expansion programme which will require Rs.30 crores and can
be funded through one of the following options:
i. Issue further equity share of Rs.100 each at par
ii. Raise loans at 15% interest
iii. Issue preference shares at 12%
Present paid up capital is Rs.60 crores and average annual EBIT is Rs.12 crores. Assume IT
rate at 50%. After the expansion EBIT is expected to be Rs.15 crores per annum. Calculate
EPS under the three financing options indicating the alternative giving the highest return to
the equity shareholders.
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