Aruz Berhad sells its product at RM45 per unit. Fixed cost per year is RM220,000 while...

Aruz Berhad sells its product at RM45 per unit. Fixed cost per year is RM220,000 while variable cost is RM15 per unit. The firm has debt capital of RM450,000 and its interest rate is 7%. Firm tax rate is 30% and the total number of shares issued is 300,000 units.

You are required to:

Calculate earnings before interest and tax (EBIT) and earnings per share (EPS) at total sales of 15,000 units.

Calculate the degree of financial leverage at sales level of 15,000 units.

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Expert Solution

Solution:-

To Calculate EBIT and EPS-

To Calculate Degree of Financial Leverage-

Degree of Financial Leverage =

Degree of Financial Leverage = 1.16 times

If you have any query related to question then feel free to ask me in a comment.Thanks.

jeff jeffy answered 2 years ago

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