The document outlines three capital structure options for a company and calculates key financial metrics for each. It shows the earnings before interest and taxes (EBIT), interest costs, earnings before tax (EBT), taxes, earnings after tax (EAT), preference dividends, and amounts available to equity shareholders. It then calculates earnings per share (EPS) and market price per share (MPS) for each option. Working notes provide details on the capital structures for each option, including amounts of debt instruments, preference shares, and equity shares. Interest costs and preference dividends are also specified for each capital structure plan.

1. CAPITAL STRUCTURE PLANNING
Solution : -
Particulars Option 1 Option 2 Option 3
EBIT XX XX XX
Less: Interest (WN-2) XX XX XX
EBT XX XX XX
Less: Tax @___ % XX XX XX
EAT XX XX XX
Less: Preference Dividend (WN-3) XX XX XX
Amount available to Equity Shareholders XX XX XX
EPS i.e Earnings Per Share
= ( Amount available to Equity Shareholders) ÷
( No of Equity Shares)
XX XX XX
MPS i.e Market Price per Share
= P/E Ratio X EPS
XX XX XX
Note- 1. Amount of EBIT will be same for all options.
2.Tax always calculate on Amount of EBT
WORKING NOTES: -
WN- 1 Capital Structure
Particulars Existing Option 1 Option 2 Option 3
Equity Share XX XX XX XX
__ % Preference
Shares
XX XX XX XX
__ % Debentures XX XX XX XX
__ % Term Loan XX XX XX XX
Retained Earnings XX XX XX XX
TOTAL XX
(Amount- Given
for Existing
Capital )
XX
(Amount-
Given for
Additional
Capital )
XX
(Amount-
Given for
Additional
Capital )
XX
(Amount-
Given for
Additional
Capital )
Note- In total Amount for Option 1, Option 2 & Option 3 will be same.
Prof. Savita Bodke Email : savitashri20@yahoo.in Page 1

2. WN- 2 Interest
Particulars Option 1 Option 2 Option 3
A. Existing
__ % Debentures XX XX XX
__ % Term Loan XX XX XX
B. New
__ % Debentures XX XX XX
__ % Term Loan XX XX XX
TOTAL XX XX XX
Note – Interest we have to calculate only on Debentures, Term Loan, Debt.
WN- 3 Preference Dividend
Particulars Option 1 Option 2 Option 3
A. Existing
__ % Preference Shares XX XX XX
B. New
__ % Preference Shares XX XX XX
TOTAL XX XX XX
Note – Preference Dividend we have to calculate only on Preference Shares at Specified rate.
WN- 4 Equity Shares
Particulars Option 1 Option 2 Option 3
A. Existing
Equity Shares XX XX XX
B. New
Equity Shares XX XX XX
TOTAL XX XX XX
Prof. Savita Bodke Email : savitashri20@yahoo.in Page 2