Question
A company reports an Earnings Before Interest and Tax
(EBIT) of ₹6,00,000. It pays annual interest of ₹1,00,000 on its borrowings. The applicable corporate tax rate is 30%. The company has 50,000 equity shares outstanding. You are required to calculate the Earnings Per Share (EPS).Solution
EBT = EBIT − Interest = ₹6,00,000 − ₹1,00,000 = ₹5,00,000 Tax = 30% of ₹5,00,000 = ₹1,50,000 EAT = ₹5,00,000 − ₹1,50,000 = ₹3,50,000 EPS = EAT / Number of Equity Shares = ₹3,50,000 / 50,000 = ₹7 per share
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