Krishna Enterprises Ltd is considering different methods to finance its expansion proposal. Estimated funds required are ₹ 60,00,000. Two alternative methods are available for raising the funds: I To...

Krishna Enterprises Ltd is considering different methods to finance its expansion proposal. Estimated funds required are ₹ 60,00,000. Two alternative methods are available for raising the funds:


I  To raise ₹ 60,00,000 by issuing  Equity Shares of  ₹100 each ,
II  To raise  ₹ 25,00,000 by issuing Equity Shares of  ₹ 100 each and ₹ 35,00,000 through Term Loan @ 10% interest per annum.


The existing capital structure of the company consists of 20,000 equity shares  of ₹ 100 each and  the expected EBIT (Earnings before interest and tax) is ₹ 11,40,000. Corporate tax rate is 25%, Advise the company on the basis of EPS in each alternative.