The Evergreen Company has the choice of raising an

The Evergreen Company has the choice of raising an additional sum of Rs 50 lakh either by the sale of 10 per cent debentures or by issue of additional equity shares of Rs 50 per share. The current capital structure of the company consists of 10 lakh ordinary shares. At what level of earnings before interest and tax (EBIT) after the new capital is required, would earnings per share (EPS) be the same whether new funds are raised by issuing ordinary shares or by issuing debentures? Also, determine the level of EBIT at which uncommitted earnings per share (UEPS) would be the same if sinking fund obligations amount to Rs 5 lakhs per year. Assume a 35 per cent tax rate. Discuss the relevance of the calculation.