Read the following information and answer the question.
Company XYZ Ltd.
TOTAL FUND USED = 50 LAKHS
| Face value of share |
₹10/- |
| Interest rate on Debt | 10% |
| Tax rate | 20% |
| EBIT | 5 Lakhs |
| Situation I (Debt) | Nil |
| Situation II (Debt) | 15 Lakhs |
Calculate No of shares issued in situation II.
Answer & explanation
Correct answer: option 2
The correct answer is option 2- 3,50,000.
In this situation total fund is 50 lakhs in which 15 lakhs is debt so share capital is 35 lakhs.
Face value per share = ₹10
No of shares = 35 lakhs/10
= 3,50,000