EPS Before the change in capital structure = $0.486 Per shares
EPS After the change in capital structure =$0.515 Per shares
Difference = $ 0.029
Explanation:
Calculation of EPS before the change in capital structure :
Particulars Amount
EBIT $ 11,400,000
Interest Cost $ 3,833,200 (51,800,000×7.4%)
Earning After Interest $ 7,566,800
Tax ( 30% ) $ 2,270,040
Net Profit after tax $ 5,296,760
Number of Shares outstanding $ 10,900,000
Earning Per Shares $0.486
Calculation of EPS after the change in capital structure :
Particulars Amount
EBIT $ 11,400,000
Interest Cost $ 5,683,200
( $ 76,800,000×7.4%)
Earning After Interest $ 5,716,800
Tax ( 30%) $ 1,715,040
Net Profit after tax $40,01,760
Number of Shares outstanding 77,75,000
Earning Per Shares $0.515
∴ we get
EPS Before the change in capital structure = $0.486 Per shares
EPS After the change in capital structure =$0.515 Per shares
Difference = $ 0.486 - 0.515 = $ 0.029