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Find out degree of financial leverage at fifty percent rate

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Reference no: EM132819827

Sunrise Ltd has a asset of 400,000 in total where it comprises of equity 70% and debt of 30% (12%) interest. The company was planning to do some investment and it anticipates the increase of current income from 40,000 to 60,000. There are two options available to resource finance namely,

A. Share issue of 1,000 at rate of 100.

B. Bond selling of 100,000 with rate of interest 12.5%. There is no preferred stock in the structure of capital.

Problem 1: Find out:

A. Optimal capital structure

B. Degree of Financial Leverage at 50% rate of tax

C. EBIT and EPS at Breakeven point

Reference no: EM132819827

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