The information of XYZ company is as follows Financial Plans ...........

Finance( Revenue Account ) Others

The information of XYZ company is as follows:

Financial Plans Equity Preference

A 100% ---

B 50% 50%

Total funds: Rs. 200 crores

Tax rate: 35%

Rate of Dividend on Preference capital:9%

Face value of one equity share: Rs. 10/-

The indifference point between Plan A and Plan B will be:

Rs. 25 crores

Rs. 26 crores

Rs. 27.69 crores

Rs. 29 crores

Indifference point is that level of EBIT at which EPS of two capital Structures is equal. It is expressed by following formula:

(X – Interest) (1- Tax)- Preference Dividend/number of equity shares.

(X- 0) (1-.35)- 0 /20 crore= (X- 0) (1-.35) - 9/10 crore

X= Rs. 27.69 Crores.

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