Operating leverage =2:1, Financial leverage=1.25:1, Fixed cost excluding intt= 3.4 lakh, sales=50 lakh,. interest =242000 ,Equity share capital=34 lakh ,Tax 30%
Calculate PV ratio
5 Replies
Sahil Kathuria
(Ca ipcc student)
(141 Points)
Replied 15 February 2018
step-1 find Combined leverage
Step-2 cont/EBT =2.5/1
cont/EBIT-Int=2.5/1
cont=2.5EBIT-605000.........(1)
O.l=2/1
contribution/EBIT=2/1
cont.=2EBIT..........(2)
solve eq1 and 2
2EBIT=2.5 EBIT-605000
EBIT=1210000
cont=EBIT + F.cost
Step-2 cont/EBT =2.5/1
cont/EBIT-Int=2.5/1
cont=2.5EBIT-605000.........(1)
O.l=2/1
contribution/EBIT=2/1
cont.=2EBIT..........(2)
solve eq1 and 2
2EBIT=2.5 EBIT-605000
EBIT=1210000
cont=EBIT + F.cost
shilpi
(student)
(780 Points)
Replied 15 February 2018
Not right.. different from ICAI suggested answers of Nov 2017 exams
Sahil Kathuria
(Ca ipcc student)
(141 Points)
Replied 15 February 2018
yes u can do in that way too.
Sahil Kathuria
(Ca ipcc student)
(141 Points)
Replied 15 February 2018
is that answer difficult for u to understand?
shilpi
(student)
(780 Points)
Replied 16 February 2018
Did you check suggested answers?Yes we can solve this question in another way too ie. by taking operating leverage or FL as a base.But don't you think answer should be the same. But in this case answer is different .that's why I am asking
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