The following information is available for Punyakalash Limited Margin of Safety 0.40 Financial Leverage 1.50 Debt 1,50,000 Tax Rate 25% Earnings…

Income Statement Punyakalash Limited Particulars Amount (₹) Sales (WN 4) 4,50,000 (-) VC 3,15,000 Contribution (WN 4) 1,35,000 (-) Fixed Cost 81,000 EBIT (WN 3) 54,000 (-) Interest (WN 2) 18,000 EBT 36,000 (-) Tax 9,000 EAT / Net profit available to equity shareholders 27,000 No of Equity shares = Net profit available to equity shareholders / EPS = 27,000 / 15 = 1,800 shares WN 1 Calculation of EPS using Earnings yield ratio Earnings yield ratio = EPS/MPS X 100 Therefore, EPS = 15 WN 2 Calculation of Interest cost Interest rate (pre-tax) = Interest rate (post tax) / (1-t) Therefore, Int Rate (pre-tax) = 9 / 0.75 = 12% Interest Cost = 1,50,000 X 12% = 18,000 WN 3 Calculation of EBIT using FL FL = EBIT / (EBIT - Int) 1.5 = EBIT / (EBIT - 18,000) Therefore EBIT = 54,000 WN 4 Calculation of Operating Leverage (OL), Contribution & Sales OL = 1 / MOS = 1 / 0.4 = 2.5 OL = Contribution / EBIT 2.5 = Contribution / 54,000 Therefore Contribution = 1,35,000 Sales = Contribution / PV Ratio = 1,35,000 / 0.3 = 4,50,000