Indifference point

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Querist : Anonymous

Querist : Anonymous (Querist)

22 November 2011 it is stated that" indifference point is indeterminate when no. of shares are equal in ebit-eps analysis"
please explain whay is it so??

CA RICHA BADALIA

CA RICHA BADALIA (Expert)
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22 November 2011 Indifferent point/level is that EBIT level at which the Earnings Per Share (EPS) is the same for two alternative financial plans.

Formula is:
(EBIT-INT1)(1-tax)-Preference dividend/No.of shares=(EBIT-INT2)(1-tax)-preference dividend/No.of shares.

Now if you put on the figures in above formula keeping number of shares same on both side EBIT would be indeterminate.

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