Scribd
Upload
209 views2 pages

Tut 12 Financial and Operating Leverage

This document provides information on operating leverage, financial leverage, and combined leverage for companies A and B, and calculates these values. It also provides information on Kaunark Enterprise's EBIT, PBT, fixed costs, and calculates the percentage change in EPS if sales increase 5%. Finally, it provides information on Arun Chemicals Ltd before and after expansion, including expected EBIT amounts and probabilities after expansion, and calculates the expected EBIT, EPS, and standard deviation of EPS and EBIT for the expanded plant.

Uploaded by

Shekhar Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
209 views2 pages

Tut 12 Financial and Operating Leverage

This document provides information on operating leverage, financial leverage, and combined leverage for companies A and B, and calculates these values. It also provides information on Kaunark Enterprise's EBIT, PBT, fixed costs, and calculates the percentage change in EPS if sales increase 5%. Finally, it provides information on Arun Chemicals Ltd before and after expansion, including expected EBIT amounts and probabilities after expansion, and calculates the expected EBIT, EPS, and standard deviation of EPS and EBIT for the expanded plant.

Uploaded by

Shekhar Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

TUTORIAL 12

OPERATING AND FINANCIAL LEVERAGE


1. Two firms A and B have the following
information
Particulars
Capital
Debentures
Output (units)
p.a.
Selling price per
unit
Fixed cost per
annum
Variable cost per
unit

Company
A
6,00,000
4,00,000
60,000

Company
B
3,50,000
6,50,000
15,000

30

250

7,00,000

14,00,00
0
75

10

You are required to calculate the operating


leverage, financial leverage, combined
leverage of two companies, if interest rate
is 12%.
2. Consider the following information per for
Kaunark Enterprise
Rs in lakh
EBIT
1120
PBT
320
Fixed Cost
700
Calculate percentage change in EPS if
sales increased by 5 percent
3. Arun Chemicals Ltd. Is considering is
expansion of its plant capacity to meet the
growing demand. The company would
finance the expansion either with 15%
debentures or issue of 10 lakh shares at a
price of Rs 16 per share. The funds
requirement is Rs 160 lakh. The
companys profit and loss statement
before expansion is as follows
Sales
Less: costs
EBIT
Less: Interest
PBT
Less:
Taxes
at
51.75%
PAT
Number of Shares
(lakh)
EPS (Rs)

Rs in lakh
1500
1050
450
50
400
207
193
50
3.86

The companys expected EBIT with


associated probabilities after expansion is
as follows:
EBIT (Rs in lakh)
250
450
540
600

Probability
.10
.30
.50
.10

You are required to calculate the


companys expected EBIT and EPS and
standard deviation of EPS and EBIT of
each plant.

TUTORIAL 12
OPERATING AND FINANCIAL LEVERAGE
1. Two firms A and B have the following
information
Particulars
Capital
Debentures
Output (units)
p.a.
Selling price per
unit
Fixed cost per
annum
Variable cost per
unit

Company
A
6,00,000
4,00,000
60,000

Company
B
3,50,000
6,50,000
15,000

30

250

7,00,000

14,00,00
0
75

10

You are required to calculate the operating


leverage, financial leverage, combined
leverage of two companies, if interest rate
is 12%.
2. Consider the following information per for
Kaunark Enterprise
Rs in lakh
EBIT
1120
PBT
320
Fixed Cost
700
Calculate percentage change in EPS if
sales increased by 5 percent
3. Arun Chemicals Ltd. Is considering is
expansion of its plant capacity to meet the
growing demand. The company would
finance the expansion either with 15%
debentures or issue of 10 lakh shares at a
price of Rs 16 per share. The funds
requirement is Rs 160 lakh. The
companys profit and loss statement
before expansion is as follows

Sales
Less: costs
EBIT
Less: Interest
PBT
Less:
Taxes
at
51.75%
PAT
Number of Shares
(lakh)
EPS (Rs)

Rs in lakh
1500
1050
450
50
400
207
193
50
3.86

The companys expected EBIT with


associated probabilities after expansion is
as follows:
EBIT (Rs in lakh)
250
450
540
600

Probability
.10
.30
.50
.10

You are required to calculate the


companys expected EBIT and EPS and
standard deviation of EPS and EBIT of
each plant.

You might also like