Financial management

Question 5 [27] You are the newly appointed financial manager of Business Like This (Pty) Ltd that sells gas bottles. The company wants to increase its sales by 2 000 units for the next financial year. Gas bottles are sold at R500 per unit with a variable cost of R250 per unit. The fixed cost is R100 000 and will not change should the number of units sold increase as planned. The tax rate is 30% You have the following information at your disposal: The company has 20 000 issued ordinary shares. Page 9 of Summative Assessment SUMMATIVE ASSESSMENT - 2021 SECOND SEMESTER FMA 101 FINANCIAL MANAGEMENT Sales (units) 2021 3 000 R 1 500 000 Revenue Variable cost Fixed cost EBIT 2022 (Projected) 5 000 R 2 500 000 (1 250 000) (100 000) 1 150 000 (750 000) (100 000) 650 000 Interest expense Net profit before tax Taxation (30%) Eamings available to ordinary shareholders (50 000) 600 000 (180 000) 420 000 (50 000) 1 100 000 (330 000) 770 000 Required: 5.1. Calculate the break-even units for the year 2021 and explain what this means. (8) Calculate the earnings per share for 2021 and the projected earnings per share for 2022 (6) 5.3. Calculate the degree of financial leverage (DFL). (13) 5.2