Scribd Logo
Upload

Welcome to Scribd!

  • 54 views

    P13

    Uploaded by

    Saeful Aziz
    The document contains tables showing the relationship between debt ratio, total assets, debt, equity, shares outstanding, earnings before interest and taxes (EBIT), earnings per share (EPS), and cost of variance (CV) for different scenarios. As debt ratio increases from 0% to 60%, EPS and CV also increase reaching a maximum at 60% debt ratio. EPS is highest when EBIT is highest and decreases as EBIT decreases. Share price is highest at a 30% debt ratio.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    P13

    Uploaded by

    Saeful Aziz
    54 views21 pages
    The document contains tables showing the relationship between debt ratio, total assets, debt, equity, shares outstanding, earnings before interest and taxes (EBIT), earnings per share (EPS), and cost of variance (CV) for different scenarios. As debt ratio increases from 0% to 60%, EPS and CV also increase reaching a maximum at 60% debt ratio. EPS is highest when EBIT is highest and decreases as EBIT decreases. Share price is highest at a 30% debt ratio.

    Original Title

    P13.xlsx

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document contains tables showing the relationship between debt ratio, total assets, debt, equity, shares outstanding, earnings before interest and taxes (EBIT), earnings per share (EPS), and cost of variance (CV) for different scenarios. As debt ratio increases from 0% to 60%, EPS and CV also increase reaching a maximum at 60% debt ratio. EPS is highest when EBIT is highest and decreases as EBIT decreases. Share price is highest at a 30% debt ratio.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    54 views21 pages

    P13

    Uploaded by

    Saeful Aziz
    The document contains tables showing the relationship between debt ratio, total assets, debt, equity, shares outstanding, earnings before interest and taxes (EBIT), earnings per share (EPS), and cost of variance (CV) for different scenarios. As debt ratio increases from 0% to 60%, EPS and CV also increase reaching a maximum at 60% debt ratio. EPS is highest when EBIT is highest and decreases as EBIT decreases. Share price is highest at a 30% debt ratio.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 21

    Debt ratio Total Assets Debt

    0% 500 0
    10.0% 500 50
    20.0% 500 100
    30.0% 500 150
    40.0% 500 200
    50.0% 500 250
    60.0% 500 300
    70.0% 500 350
    80.0% 500 400
    90.0% 500 450
    100.0% 500 500
    Equity Shares
    500 25.00
    450 22.50
    400 20.00
    350 17.50
    300 15.00
    250 12.50
    200 10.00
    150 7.50
    100 5.00
    50 2.50
    0 -
    P13-16 Firm R
    Sales units 75000 100,000 125,000 25.0% 75000
    Price $/unit 2.00 2.00 2.00 2.50
    VC $/unit 1.70 1.70 1.70 1.00
    FC $ 6,000 6,000 6,000 62,500
    Interest $ 10,000 10,000 10,000 17,500
    Tax 40.0% 40.0% 40.0% 40.0%

    Revenue $ 150,000 200,000 250,000 187,500


    Variable Cost $ (127,500) (170,000) (212,500) (75,000)
    Fixed Cost $ (6,000) (6,000) (6,000) (62,500)
    EBIT $ 16,500 24,000 31,500 31.3% 50,000
    Interest $ (10,000) (10,000) (10,000) (17,500)
    EBT $ 6,500 14,000 21,500 32,500
    Tax $ (2,600) (5,600) (8,600) (13,000)
    NPAT $ 3,900 8,400 12,900 53.6% 19,500

    DOL 1.25 Less Operational risk


    DFL 1.71 More financial risk
    Total Leverage 2.14 Same total risk
    2.14
    Firm W
    100,000 125,000 25.0%
    2.50 2.50
    1.00 1.00
    62,500 62,500
    17,500 17,500
    40.0% 40.0%

    250,000 312,500
    (100,000) (125,000)
    (62,500) (62,500)
    87,500 125,000 42.9%
    (17,500) (17,500)
    70,000 107,500
    (28,000) (43,000)
    42,000 64,500 53.6%

    1.71 More operational risk


    1.25 Less Financial risk
    2.14 Same total risk
    2.14
    Scenario 1 Scenario 2
    P13-27 Probability 0.30 0.40

    Sales 600,000 900,000


    Variable Cost (240,000) (360,000)
    Fixed Cost (300,000) (300,000)
    a EBIT 60,000 240,000
    Tax (24,000) (96,000)
    NPAT 36,000 144,000

    b Debt Ratio Total Asset Debt Equity Shares Before tax rd after tax

    0% 1,000,000 - 1,000,000 40,000 0% 0%


    15.00% 1,000,000 150,000 850,000 34,000 8% 5%
    30.00% 1,000,000 300,000 700,000 28,000 10% 6%
    45.00% 1,000,000 450,000 550,000 22,000 13% 8%
    60.00% 1,000,000 600,000 400,000 16,000 17% 10%

    d 0% Scen1 0.90 0.30 (2.70) 7.29


    0% Scen2 3.60 0.40 - -
    0% Scen3 6.30 0.30 2.70 7.29
    EPS 3.60 4.37
    2.09 0.581
    SD CV
    15% Scen1 0.85 (3.18) 10.09
    15% Scen2 4.02 - -
    15% Scen3 7.20 3.18 10.09
    EPS 4.02 6.05
    2.46 0.612

    30% Scen1 0.64 (3.86) 14.88


    30% Scen2 4.50 - -
    30% Scen3 8.36 3.86 14.88
    EPS 4.50 8.93
    2.99 0.664

    45% Scen1 0.04 (4.91) 24.10


    45% Scen2 4.95 - -
    45% Scen3 9.86 4.91 24.10
    EPS 4.95 14.46
    3.80 0.768

    60% Scen1 (1.58) (6.75) 45.56


    60% Scen2 5.18 - -
    60% Scen3 11.93 6.75 45.56
    EPS 5.18 27.34
    5.23 1.010

    f Debt Ratio 0% 15.00% 30.00% 45.00% 60.00%


    EPS 3.60 4.02 4.50 4.95 5.18
    CV 0.58 0.61 0.66 0.77 1.01

    EPS vs Debt Ratio


    6.00 1

    5.18
    4.95 1.01 1
    5.00
    4.50
    4.02
    4.00 0
    3.60 0.77

    0.66
    3.000.58 0.61 0

    2.00 0

    1.00 0

    - -
    0% 15% 30% 45% 60%
    EPS CV

    g EBIT 60,000 240,000 420,000


    0% 0.90 3.60 6.30
    30% 0.64 4.50 8.36
    60% (1.58) 5.18 11.93

    EPS vs EBIT
    14.00

    12.00

    10.00

    8.00

    6.00

    4.00

    2.00

    -
    8.00

    6.00

    4.00

    2.00

    -
    60,000 240,000
    (2.00)

    (4.00)
    0% 30% 60%

    h Debt ratio EPS/rs Share Price


    0% 36.00
    15% 38.32
    30% 38.79
    45% 35.36
    60% 25.88

    i to maximize EPS 60% debt


    to maximize share price 30% debt selected
    Scenario 3
    0.30

    1,200,000
    (480,000)
    (300,000)
    420,000
    (168,000)
    252,000
    c
    annual
    rs wacc interest
    10% 10% -
    11% 10% 12,000
    12% 10% 30,000
    14% 11% 58,500
    20% 14% 102,000
    1.20

    5.18
    4.95 1.01 1.00

    0.80
    0.77

    0.60

    0.40

    0.20

    -
    45% 60%

    EBIT
    000 420,000

    0% 60%

    You might also like