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
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Pv ratio
Replies (5)
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
Not right.. different from ICAI suggested answers of Nov 2017 exams
yes u can do in that way too.
is that answer difficult for u to understand?
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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