Question
The capital structure of ABC Pvt. Ltd is as follows: Equity share capital (eachshareofRs.10) = Rs.16, 00,000 Debentures with a coupon rate of 10%= Rs.
The capital structure of ABC Pvt. Ltd is as follows:
Equity share capital (eachshareofRs.10) = Rs.16, 00,000
Debentures with a coupon rate of 10%= Rs. 10, 00,000
Reserves and surplus= Rs.15, 00,000
Revenue from the business activities for the company is Rs. 2.00 crores. Its variable cost is 10% of the revenue, fixed operating cost is Rs. 60 lakhs and the company pays income tax at a rate of 25%.
a. Calculate financial leverage, operating leverage and combined leverage for the company.
b. Determine the likely level of EBIT for EPS of (i) Rs.45, (ii) Rs.60, and(iii) Rs. 75.
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Advanced Accounting
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
11th Edition
978-0132568968, 9780132568968
