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19.
Four Marks Questions
32. 'Smart Stationery Ltd.' wants to raise funds of 40,00,000 for its new project. The manageme:
is considering the following mix of debt and equity to raise this amount:
Capital Structure
Alternative
1)
11 (5)
Equity
40,00,000
30,00,000
10,00,000
Debt
10,00,000
30,00,000
Other details are as follows:
Interest Rate on Debt
Face Value of Equity Shares
100 each
Tax Rate
30%
Earning Before Interest and Tax (EBIT)
(a) Under which of the three alternatives will the company be able to take advantage of Tracing
on Equity?
(b) Does Earning Per Share always rise with increase in debt?
8,00,000
(CBSE 2019 (66/21
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