a

Exercise 8 Calculate operating leverage and financial leverage under situations A, B and C and financial plans 1, 2 and 3 respectively from the following information relating to the operating and financial leverage which give the highest value and the least value. 1,200 800 20 Installed capacity (units) Actual production and sales (units) Selling price per unit (Rs.) Variable cost per unit (Rs.) Fixed costs (Rs.) Situation A 15 10 1,000 Situation B 2,000 Situation C 3,000 Capital Structure Financial Plan 2 3 Equity Debt Cost of debt Rs. 5,000 Rs. 5,000 Rs. 7,500 Rs. 2,500 12 per cent Rs. 2,500 Rs. 7,500 (for all plans)