Question: Calculate Operating Leverage and Financial Leverage under situations X, Y and Z and financial plan 1,2 and 3 respectively form the following information relating to

Calculate Operating Leverage and Financial Leverage under situations X, Y and Z and financial plan 1,2 and 3 respectively form the following information relating to the operation and capital structure of P, Q and R limited. Also, find out the combinations of operating and financial leverage which give the highest value and the least value.

Installed Capacity(Units)

1200

Actual Production and Sales (Units)

800

Selling Price per unit

15

Variable Cost per unit

10

Fixed Cost

Situation X

1000

Situation Y

2500

Situation Z

5000

Total Capital Required

10,000

'

Capital Structure

1

2

3

Equity

50%

75%

25%

Debt

50%

25%

75%

Cost of Debt

12%

15%

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