The Balance Sheet of International Trade Ltd. as on 31/3/2008 is as under:-
Equity capital (Rs. 10 Each)
10% Long term debt
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.