Calculate the market price of share corporate tax rate, Finance Basics

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The Balance Sheet of International Trade Ltd. as on 31/3/2008 is as under:-                                 

Liabilities

Amount

Assets

Amount

Equity capital (Rs. 10 Each)

90

Building

150

10% Long term debt

120

Machinery

75

Retained Earnings

30

Stock

50

Current Liabilities

60

Debtors

20

 

 

Cash

5

Total

300

Total

300

The total 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 require to:

(i)    Calculate the operating, financial and combined leverage.

(ii)   Calculate the market price of the share if the P/E multiple is 2.5

(iii)  Calculate the level of EBIT if the EPS is (a) Rs.15 (b) Rs.25.

 


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