Calculate - EPS, assuming face value of a equity Share of ₹10.

Total funds - ₹50 lakh
Interest rate - 10% p.a
Tax rate - 50%
EBIT - ₹5 lakh
Debt - ₹20 lakh

0.50

The correct answer is Option (3) → 0.50.

Total funds - ₹50 lakh

Debt - ₹20 lakh

Equity = 50 lakh - 20 lakh
          = 30 lakh

Face value per share = ₹10

No of equity shareholders = 30,00,000/10
                                      = 3,00,000

Earning before interest and tax = ₹5 lakh

Interest on debenture = 20,00,000 x 10/100
                                 = 2,00,000 (or 2 lakh)

Earning after interest before tax = EBIT - Interest
                                               = 5,00,000 - 2,00,000
                                                = 3,00,000

Tax rate = 50%

Tax = 3,00,000 x 50/100
      = 1,50,000

Earning after tax = EBT - Tax
                         = 3,00,000 - 1,50,000
                         = 1,50,000

EPS = Earning after tax/ No of equity shares
       = 1,50,000/3,00,000
       = 0.50

Thus, earning per share is 0.50.