Visit and Buy
Q1: A company has sales of 4,00,000 units at ₹5 per unit, variable cost ₹0.60 per unit,
fixed cost ₹2,00,000 and interest charges of ₹3,500. Compute degree of
operating leverage and financial leverage and comment on the values of each leverage.
fixed cost ₹2,00,000 and interest charges of ₹3,500. Compute degree of
operating leverage and financial leverage and comment on the values of each leverage.
(10 Marks)
Q2: A choice is to be made between the two competing proposals which require
an equal investment of ₹50000 and are expected to generate net cash flows as
under:
an equal investment of ₹50000 and are expected to generate net cash flows as
under:
Years |
Project A(₹) |
Project B (₹) |
1 |
25000 |
10000 |
2 |
15000 |
12000 |
3 |
10000 |
18000 |
4 |
Nil |
25000 |
5 |
12000 |
8000 |
6 |
6000 |
4000 |
Cost of capital of the company is 10%. Which proposal should be
selected using NPV method? (10 Marks)
selected using NPV method? (10 Marks)
Q3: 3. Gamma Corporation was a 20 years old company and its capital
structure consisted of 1000 equity shares of ₹100 each, 500 preference
shares(10%) of ₹50 each and 500 debentures(8%) of ₹30 each. The management of
the company wanted to estimate what would be the value of EPS if the values of
EBIT were changed and tax rate is 35%.
structure consisted of 1000 equity shares of ₹100 each, 500 preference
shares(10%) of ₹50 each and 500 debentures(8%) of ₹30 each. The management of
the company wanted to estimate what would be the value of EPS if the values of
EBIT were changed and tax rate is 35%.
a) Calculate EPS if the level of EBIT is ₹1,00,000 (5 Marks)
b) Calculate EPS if the level of EBIT is ₹1,50,000 (5 Marks)
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