Question $4$

$[35$ Marks$]$

Technopark Traders Limited manufactures and sells solar panels for commercial and residential markets. The current selling price per unit is R$117,$ the variable cost per unit is R$78,$ and the fixed operating costs per annum are R$975000.$ The Company currently sells $58500$ solar panels each year.

The company has the following financial instruments in issue:

R$1300000$ corporate bonds incurring interest at $20\mathrm{.}4$ per cent per annum.

$6\mathrm{.}30$ per cent R $2600000$ preference shares.

Assume a current tax rate of $27$ per cent.

Required:

a$)$ Calculate Technopark Traders' break$-$even point.

$(3$ Marks$)$

b$)$ Calculate Technopark Traders' EBIT for the year, using the information provided assuming sales units of $58500.$

$(10$ Marks$)$

c$)$ Calculate Technopark Traders' degree of operating leverage.

$(3$ Marks$).$

d$)$ Calculate Technopark Traders' degree of financial leverage.

$(6$ Marks$)$

e$)$ Calculate Technopark Traders' degree of total leverage

$(3$ Marks$)$

f$)$ Calculate what impact $($as a percentage change$)$ the sale of $29250$ additional solar panels would have on the company's EBIT and net profit. Use answers in $($c$)$ to $($e$)$ to derive your answer.

$(10$ Marks$)$