The Balance Sheet of MP Ltd. as on 31st March, 2018 is given as under: Liabilities Amount (₹) Assets Amount (₹) Equity Share Capital (₹ 10 each) 1,60,000 Fixed Assets 3,00,000 Reserves 80,000 Current Assets 1,00,000 10%

(i) Level of EBIT when EPS is ₹ 1 Let X be the level of EBIT, then EPS = [(X - Interest) (1 - tax rate)] / No. of equity shares Interest = 10% of ₹ 1,20,000 = ₹ 12,000 No. of equity shares = ₹ 1,60,000 / ₹ 10 = 16,000 shares 1 = [(X - 12,000) (1 - 0.50)] / 16,000 1 = (0.5X - 6000) / 16000 16,000 = 0.5X - 6000 0.5X = 22,000 X = ₹ 44,000 EBIT = ₹ 44,000 (ii) Level of EBIT when EPS is ₹ 3 Let X be the level of EBIT, then EPS = [(X - Interest) (1 - tax rate)] / No. of equity shares 3 = [(X - 12,000) (1 - 0.50)] / 16,000 3 = (0.5X - 6000) / 16000 48,000 = 0.5X - 6000 0.5X = 54,000 X = ₹ 1,08,000 EBIT = ₹ 1,08,000