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Vivo Ltd. is a company manufacturing textiles. It has a share capital of ` 60 lakhs. The earnings per share in the previous year was ` 0.50. For diversification, the company requires an additional capital of ` 40 lakh. The company raised funds by issuing 10% debentures for the same. During the current year, the company earned a profit of ` 8 lakhs on the capital employed. It paid tax @ 40%. (a) State whether the shareholders gained a lost, in respect of earning per share on diversification. Show your calculations clearly. (b) Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.                                                                                                                                                                                                             [Delhi 2016]

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