The following is the Balance Sheet as at 31st March 2017 of RKD Company Ltd. : Items ₹ ₹ 10,000 equity shares of ₹100 each fully paid up 10,00,000 25,000 11% cum preference shares of ₹10 each fully paid up 2,50,000 12,50

The following is the Balance Sheet as at 31st March 2017 of RKD Company Ltd. : Items ₹ ₹ 10,000 equity shares of ₹100 each fully paid up 10,00,000 25,000 11% cum preference shares of ₹10 each fully paid up 2,50,000 12,50,000 Reserves and surplus 25,00,000 Secured loans 20,00,000 Unsecured loans 12,00,000 Trade creditors 18,00,000 Outstanding expenses 7,50,000 Total liabilities 95,00,000 Fixed assets 55,00,000 Current assets 37,00,000 Advances and deposits 3,00,000 Total assets 95,00,000 The company plans to manufacture a new product in line with its current production, the capital cost of which is estimated to be ₹25,00,000. The company desires to finance a new project to the extent of 16 lakhs by issue of equity shares at a premium of ₹100 per share or by issue of 12% debentures and the balance to be raised from internal sources. Additional information made available to you are : Rate of dividends declared in the past 5 years i.e. year ended 31st March 2017, 31st March 2016, 31st March 2015, 31st March 2014, 31st March 2013 were 24%, 24%, 20%, 20% and 18% respectively. Normal earning capacity (net of tax) of the business is 10%. Turnover in the last three years i.e. 31-03-2017, 31-03-2016 and 31-03-2015 was ₹80 lakh, 60 lakh and 50 lakh respectively. Anticipated additional sales from the new project—₹30 lakh annually. Net profit before tax from the existing business which was 10% in the last three years is expected to increase to 12% on account of new product sales. Income-Tax rate is 35%. The trend of market price of the equity share of company quoted on the Stock Exchange was: Year High (₹) Low (₹) 2016-17 300 190 2015-16 250 180 2014-15 240 180 You are required to examine the following: Expected EPS and debt equity ratio if 16 lakh financed by issue of 12% debentures at par.