The capital structure of the progressive Corporation Ltd, consists of an Equity Share Capital of Shs....

Transcribed Image Text:

The capital structure of the progressive Corporation Ltd, consists of an Equity Share Capital of Shs. 1,000,000 (Shares of Shs. 10 per value) and 1,000,000 of 20% debentures. Sales increased by 25% from 200,000 units to 250,000 units. The selling price is Kshs. 10 per unit. Variable costs amount to Kshs. 6 per unit and fixed expenses amount to Shs. 250,000. Income tax rate is assumed to be 50% Required: i) The percentage increase in earnings per share (2 marks) ii) The degree of financial leverage at 200,000 units and 250,000 units (2 marks) iii) The degree of operating leverage at 200,000 units and 250,000 units (3 marks) The capital structure of the progressive Corporation Ltd, consists of an Equity Share Capital of Shs. 1,000,000 (Shares of Shs. 10 per value) and 1,000,000 of 20% debentures. Sales increased by 25% from 200,000 units to 250,000 units. The selling price is Kshs. 10 per unit. Variable costs amount to Kshs. 6 per unit and fixed expenses amount to Shs. 250,000. Income tax rate is assumed to be 50% Required: i) The percentage increase in earnings per share (2 marks) ii) The degree of financial leverage at 200,000 units and 250,000 units (2 marks) iii) The degree of operating leverage at 200,000 units and 250,000 units (3 marks)

Answer rating: 100% (QA)

The detailed answer for the above question is provided below I Percentage Increase in Earnings per S... View the full answer