PAT 33,000 36,000 39,000 60,000 Number of equity shares 5,000 9,000 10,000 12,000 (ii) EPS (Rs.) 6.60 4.00 3.90 5.00 (iii) Operating leverage = 1,00,000 1,25,000 1,50,000 2,00,000 Contribution 70,000 85,000 1,00,000 1,40,000 EBIT = 1.42 1.47 1.5 1.43 (iv) Financial leverage = 70,000 85,000 1,00,000 1,40,000 EBIT 55,000 60,000 65,000 1,00,000 = 1.27 1.42 1.54 1.40 Illustration 10: The Balance sheet of International Trade Ltd. as on 31st March, 2008 is as under: Liabilities Rs. Assets Rs. (Lakhs) (Lakhs) Equity Share Capital 90 Building 150 (Rs. 10 per share) 10% Long term debt 120 Machinery 75 Retained Earnings 30 Stock 50 Current Liabilities 60 Debtors 20 Cash 5 Total 300 Total 300 28 The income assets turnover ratio of the company is 3, its fixed operating cost is 1/6 of sales and variable operating cost is 50% of sales. The corporate tax rate is 35%. You are required to calculate: (a) The operating, financial and combined leverages. (b) The market price of the share if the P/E multiple is 2.5. (c) The level of EBIT if the EPS is (a) Rs. 15 and (b) Rs. 25