The operating profit (EBIT) of ABC Ltd is Rs. 1,60,000. Its capital structure consists of the following:
10% Debentures Rs. 500000
12% Preference Shares 100000
Equity Shares (Rs.100 each) 400000
The company is in the tax bracket of 35%. The withholding tax on preference dividend is 10%.
(i) Determine EPS
(ii) Determine the DFL
(iii) Determine the % change in EPS if EBIT increase by 30%.
(iv) Assuming DOL 2, determine the DCL.