Start your journey with Financial Management - Dr A Murthy Solutions today. Disclaimer: This article is for informational purposes. Readers are advised to refer to the latest syllabus and edition of the textbook prescribed by their respective university.
If expected EBIT > Rs. 228,000, choose Option B (Debt). If EBIT < Rs. 228,000, choose Option A (Equity).
Company X has Equity share capital of Rs. 10,00,000 (Rs. 100 each) and 10% Debentures of Rs. 6,00,000. Tax rate 50%. The company wants to raise Rs. 4,00,000 for expansion. Options: (A) All Equity, (B) All Debt at 12%. Find the indifference point. Typical Textbook Solution (Confusing): "EPS under Option A = EPS under Option B. Let EBIT be X. (X - 60,000)(1-0.5)/1400 = (X - 108,000)(0.5)/1000. Solve for X." (Students get lost in algebra). Financial Management - Dr A Murthy Solutions (Structured): Step 1: Organize the data in a table. financial management - dr a murthy solutions
In the complex world of business, the line between success and failure is often drawn by one critical discipline: financial management. For students pursuing commerce, management, or professional accounting courses like CA, CMA, or CS, the subject of Financial Management (FM) is notoriously challenging. It is a field where theoretical concepts meet mathematical rigor, and where a single misapplied formula can skew an entire investment decision.
Whether you are analyzing your personal loan EMI (applying TVM), deciding if a rental property is a good investment (applying NPV), or managing a startup's cash flow (applying Working Capital principles), the Dr. A. Murthy methodology stays with you. Start your journey with Financial Management - Dr
(10,000(EBIT - 60,000) = 14,000(EBIT - 108,000)) (10EBIT - 600,000 = 14EBIT - 1,512,000) (912,000 = 4EBIT) (EBIT = Rs. 228,000)
For any commerce student feeling overwhelmed by the numbers, the advice is simple: Stop memorizing formulas randomly. Pick up a copy of the solutions, cover the answer side, and solve the problems step-by-step. Let the Dr. A. Murthy structure guide your logic. If expected EBIT > Rs
| Particulars | Option A (All Equity) | Option B (All Debt) | | :--- | :--- | :--- | | Existing Debt Interest | Rs. 60,000 (10% of 6L) | Rs. 60,000 | | New Debt Interest | 0 (No new debt) | Rs. 48,000 (12% of 4L) | | | Rs. 60,000 | Rs. 108,000 | | Existing Shares | 10,000 shares | 10,000 shares | | New Shares (Rs. 100 each) | 4,000 shares (Raised 4L) | 0 shares | | Total Shares (N) | 14,000 shares | 10,000 shares |