Calculate EPS of Solid Ltd. and Sound Ltd. assuming (a) 20% Before Tax return on Assets; (b) 10% Before Tax return on Assets; on the basis of the following data: Solid Ltd. (Rs.) Sound Ltd. (Rs.) Total Assets 10,000,000 10,000,000 Equity Share Capital (FV Rs.10 each) 10,000,000 5,000,000 12% Debt --- 5,000,000 Comment on the Financial Leverage of the firm assuming tax rate of 50%. 11. Following is the Balance Sheet of MA Equipment Ltd. Liabilities Rs. Assets Rs. Equity capital (Rs.10 per share) 60,000 Fixed assets 150,000 Retained earnings 20,000 Current assets 90,000 10% Debt 80,000 Current liabilities 80,000 The firm had Fixed Assets turnover of 4, the fixed operating costs are Rs.100,000, variable costs are 40% and a tax rate of 5 0%. Find out: (i) Different Leverages for the firm; (ii) Likely level of EBIT if the EPS is (a) Rs.1; (b) Rs.3; (iii) Financial break-even level.

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