Gradable Assignment 2 - Corporate Finance 1 Assignment 2 Chandrasekar is running a company manufacturing and selling electronic toy with the installed

Gradable Assignment 2 - Corporate Finance 1 Assignment 2...

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Corporate Finance Assignment 2 1. Chandrasekar is running a company manufacturing and selling electronic toy with the installed capacity of 1,00,000 quantities per annum. It is currently selling at 75,000 units. The cost sheet is given below: a. Price per unit ₹200 b. Variable cost per unit ₹120 c. Fixed cost ₹20,00,000 d. Interest ₹12,00,000 e. Tax rate 35% f. No. of outstanding shares 10,00,000 As per next year forecast there are two possibilities i) the selling will come down by 15,000 units ii) the selling may reach the full installed capacity. In each case, what contributed the profit or loss (Operating and financial leverages). i. How will you use the degree of leverages to calculate new EBIT and new EPS? ii. Now check with income statement the results are correct or not. iii. Calculate the new DOL, DFL & DCL and comment Operating Leverage = EBIT/Sales Financial Leverage = EBIT/EBT Combined Leverage = EPS/Sales Particulars i. ii. iii. Sales 1,50,00,000 1,20,00,000 2,00,00,000 Less: Variable Cost 90,00,000 72,00,000 1,20,00,000 Contribution 60,00,000 48,00,000 80,00,000 Less: Fixed Cost 20,00,000 20,00,000 20,00,000 EBIT 40,00,000 28,00,000 60,00,000 Less: Interest 12,00,000 12,00,000 12,00,000 EBT 28,00,000 16,00,000 48,00,000
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