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.