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a) What is optimum capital structure? Briefly explain the primary factors those influence the capital structure decisions of a firm. b) The balance sheet


 









a) What is optimum capital structure? Briefly explain the primary factors those influence the capital structure decisions of a firm. b) The balance sheet and the income statement for 2020 of Dulal Corporation are as follows: Balance sheet on 31/12/2020 Current assets Tk. 3,00,000 Debt Tk. 0 Net fixed assets Total Assets 14,00,000 17,00,000 Common equity 17,00,000 Total liabilities and equity 17,00,000 Income Statement on 31/12/2020 Sales Fixed cost Variable costs EBIT Taxes (40%) 12,00,000 (1,30,000) (7,50,000) 3,20,000 (1,28,000) Net Income 1,92,000 When the firm finances 50% of its capital with debt it incurs the cost of 12%. Based on the above information show the effects of leverage on EPS with your comments when I. D/A = 0% II. D/A = 50 c) Referring to the question no. b calculate the DOL, DFL, and DTL and comments on your results.

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