Calculate financial leverage and operating leverage

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Question - The capital structure of ABC Pvt. Ltd is as follows: Equity share capital (each share of Rs. 10) = Rs. 10,00,000 Debentures with a coupon rate of 9.5% = Rs. 8,00,000 Reserves and surplus = Rs. 7,00,000. Revenue from the business activities for the company is Rs. 1.50 crores. Its variable cost is 8% of the revenue, fixed operating cost is Rs. 48 lakhs and the company pays income tax at a rate of 25%.

Required -

a. Calculate financial leverage, operating leverage and combined leverage for the company.

b. Determine the likely level of EBIT for EPS of (i) Rs. 20, (ii) Rs. 30, and (iii) Rs. 45.

Reference no: EM133113743

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