If a firm has total revenue of 100 million where the cost of goods sold is 50% and

fixed cost is 15 million. The firm has 1 million shares outstanding which sells for
120 taka each and also has issued 100000 bonds with YTM of 8% maturing in 15
years. If the firm pays 35% corporate tax find out the EPS of the firm. How about
is the firm raises capital by issuing 25000 more bonds which also sells for 1000
taka and buys back the shares from the market will it enhance the EPS?

Revenue 100 m 25000 bonds with 1000 tk = 25 m extra debt

25 m / 120 = 208334 less share so new equity

Costs of goods sold 50 m will be 1 million – 208334 = 791667 no. of shares

Fixed cost 15 m

EBIT 35 m 35 m

Minus Interest payment 8m 10 m

EBT 27 m 25 m

Tax 9.45 m 8.75 m

EAT 17.55 m 16.25 m

No. of shares 1 million new no of shares 791667, 16.25 m/791667 = 20.52 taka EPS

So EPS = 17.55 taka per share

P/E will be = price of the share/ EPS

= 120/17.55 = 6.76