**Tasks**

1. The enterprise plans to produce and sell 2000 units of products annually. The planned price of a unit of production is 5000 rubles, variable costs per unit of production are 3000 rubles, fixed costs per year are 1500 thousand rubles. Determine the effect of the company’s production leverage.

According to the problem, p = 5000 rubles, FC = 1,500,000 rubles, v = 3000 rubles, Q = 2000 units.

= 1.6(times)

RCS will be 1.6 times. Therefore, for a 1% increase in production, there will be a 1.6% increase in EBIT.

2. There are the following initial data:

Indicators | Data in rubles | |||

Fixed costs | 96 000 | |||

Unit price | ||||

Variables | expenses | on the | unit | |

products |

Determine the critical sales volume, the sales volume that provides profit before interest and taxes in the amount of 30 thousand rubles. According to the condition of the problem, FC = 96,000 rubles, p = 200 rubles, v = 80 rubles.

Qc = 800 units

Qi ==

The critical sales volume will be 800 units, the sales volume that will provide EBIT in the amount of 30,000 rubles. will be 1050 units.

3. Compare, on the basis of the EGF, two options for the organization’s capital structure, taking into account the peculiarities of taxation in the Russian Federation, if

1) equity capital is 2000 thousand rubles, borrowed capital is not used, operating profit (EBIT) is 800 thousand rubles, the income tax rate is 20%;

2) equity is 1,000 thousand rubles, debt capital is 1,000 thousand rubles, the refinancing rate is 7.75%, operating profit (EBIT) is 800 thousand rubles, the income tax rate is 20%, the rate on credit – 20%.

Indicators | Capital structure option | |||||

Own capital, thousand rubles | ||||||

Borrowed capital, thousand rubles | — | |||||

Operating profit, thousand rubles | ||||||

Loan interest rate, % | — | |||||

Bid | refinancing | CB, | — | 7.75*1.1 = 8.525 | ||

increased by 1.1. | ||||||

Sum | percent | behind | credit | in | — | |

within | rates | |||||

refinancing, | ||||||

adjusted by 1.1, thousand rubles. | ||||||

taxable | profit, | 800-85.25= 714.75 | ||||

thousand roubles. | ||||||

Income tax rate, % | ||||||

Sum | tax | on the | profit, | 800*0.2 = 160 | 714.75*0.2 = 142.95 | |

thousand roubles. | ||||||

Bid | percent, | exceeding | — | 20-8.525 = 11.475 | ||

bet | refinancing, | |||||

exceeding | bet | |||||

refinancing, | ||||||

adjusted by 1.1, % | ||||||

The amount of interest on a loan | ||||||

rate, | exceeding the rate | |||||

refinancing, | ||||||

corrected | on the | 1.1 | ||||

thousand roubles. | ||||||

Net profit, thousand rubles | 800-160 = 640 | 714.75-142.95-114.75= 457.05 | ||||

Profitability | own | (640/2000) | (457.05/1000)*100%=45.71% | |||

capital, % | *100% = 32% | |||||

Effect of financial leverage, % | — | 13.71% |

If we do not take into account the peculiarities of calculating income tax in the Russian Federation, then the EGF can be defined as follows:

EGF _{2} = ( * 100 – 20) *

The calculation, taking into account Russian features, looks like this:

A verification calculation can be made based on the table data: Rcc _{2} = Rcc _{1} + EGF _{2} = 32 + 13.71 = 45.71%

A verification calculation can be made based on the table data: Rcc _{2} = Rcc _{1} + EGF _{2} = 32 + 13.71 = 45.71%

Consequently, in Russian conditions, the peculiarities of calculating income tax lead to a decrease in the EFR.

Based on the calculation of the effect of the financial leverage of the second variant of the capital structure, it can be concluded that the use of borrowed funds will increase the profitability of the company’s own funds by 13.71%.

4. The following data are available on the activities of the two companies.

Indicators | Company “South” | Company “Sever” | |||

Joint Stock | capital, | ||||

thousand roubles. | |||||

Par value of a share, rub. | |||||

Debt | obligations, | ||||

thousand roubles. | |||||

Bid | percent | on | |||

debt | obligations | ||||

% | |||||

Profit | before | deduction | |||

percent | and | taxes | |||

(EBIT), thousand rubles |

Determine and compare the leverage effect of the two companies, as well as EPS if the income tax rate is 20%.

Determine the EGF and EPS for the company “South”

EGF u003d EBIT / (EBIT – I) u003d 1500 / (1500-0.18 * 800) u003d 1.11 (times) EPS u003d = 5.42 rubles.

Let’s determine the EGF and EPS for the company “Sever”

EGF u003d EBIT / (EBIT – I) u003d 1500 / (1500-0.18 * 2000) u003d 1.32 (times)

EPS = = 11.4 RUB

The Sever company has a higher share of debt capital, which is reflected in the EGF and EPS values. The volatility of the company’s net income is higher. If EBIT increased by 1%, then net income could increase by 1.32%.

5. To date, the company has already issued bonds in the amount of 200 thousand rubles. (coupon rate 12% per annum). There are 100,000 ordinary shares in circulation. To expand the activities of the organization, 350 thousand rubles are needed. There are three options for attracting resources: a) the issue of bonds (coupon rate of 14% per annum), b) the issue of preferred shares with the payment of dividends at a rate of 12% per annum,

c) issue of ordinary shares at a price of 200 rubles per share. Determine the value of EPS for all possible options, if the profit before interest and taxes is 2 million rubles, and the income tax rate is 20%.

Calculate the “point of indifference” for options: a) first and third, b) second and third.

To determine net earnings per share, we use the formula

1 option

EBIT = 2,000,000 rubles,

I u003d 200,000 * 0.12 + 350,000 * 0.14 u003d 73,000 rubles. T = 0.2

S = 100,000 pcs.

EPS=

Option 2

EBIT = 2,000,000 rubles,

I u003d 200,000 * 0.12 u003d 24,000 rubles. T = 0.2

S = 100,000 pcs.

D _{pa} u003d 350,000 * 0.12 u003d 42,000 rubles.

EPS=

3 option

EBIT = 2,000,000 rubles,

I u003d 200,000 * 0.12 u003d 24,000 rubles. T = 0.2

S = 100,000 + 350,000/200 = 101,750 pcs.

EPS=

As a result of calculations, we obtain the highest EPS value in the third option, since financial costs that affect net profit are minimal.

Calculation of the point of indifference will be carried out according to the formula:

For the first and third options:

EBIT = RUB 2,873,000

Thus, with an operating profit of 2,873,000 rubles. the company will have an equal EPS value for the first and third funding options.

For the second and third options:

EBIT = 3076500 rub.

Thus, with an operating profit of 30,765,000 rubles. the company will have an equal EPS value for the second and third funding options.

6. A company with 100,000 ordinary shares outstanding has just placed 10,000 convertible preferred shares with a nominal value of 20 rubles and a rate of 6%. The planned net profit for the next year is 325,000 rubles. The conversion rate is 2. Determine the net earnings per share if a) none of the preferred shares are converted,

b) all preferred shares will be converted.

EPS = |
325000 −20*0.06*10000 | = 3.13 | |||

EPS = |
= 2.71 | ||||

100000 +10000*2 |

7. At the end of the year, the company’s net profit amounted to 500 thousand rubles. The weighted average number of company shares is 11,000. In addition, last year the company issued 1,000 preferred shares with the right to receive dividends in the amount of 20 rubles per share and the right to convert one preferred share into three ordinary shares. Calculate basic and diluted earnings per share.

EPS= u003d 43.64 rubles.

EPS=

8. Determine the EFR and EPR, as well as the combined effect of the two levers, if the company’s activities are characterized by the following data:

Indicators | Meaning |

Volume of sold products, units | 20 000 |

Unit price, rub. | |

Specific variable costs, rub. | |

Fixed costs, rub. | 30,000 |

The amount of interest paid for the use of the loan | 10,000 |

rub. |

According to the condition of the problem, Q = 20000 units, FC = 30000 rubles, I = 10000 rubles, v = 7

rub., p u003d 10 rubles.

The specific marginal profit will be c u003d p – v u003d 10-7 u003d 3 rubles.

EGF = EBIT / (EBIT – I) = u003d 1.5 (times)

EPPR u003d EPR * EGF u003d 2 * 1.5 u003d 3 (times)

Thus, with an increase in sales volume by 1%, the company’s net profit will increase by 3%.

**Tasks for independent solution**

1. Evaluate the effect of financial leverage and draw conclusions about its impact on the return on equity based on the following data:

(thousand roubles.)

Indicators | Options | |||||

Average assets | ||||||

Average amount of own | ||||||

funds | ||||||

Medium | sum | borrowed | ———— | |||

funds | ||||||

Sum | arrived | before | deduction | |||

interest and taxes | ||||||

Medium | estimated | bid | ||||

percent, % | ||||||

Return on assets, % | ||||||

Sum | percent, | ———— | ||||

paid for | use | |||||

borrowed funds | ||||||

Sum | taxable | |||||

arrived | ||||||

Income tax rate, % | ||||||

Income tax amount |

Amount of net profit

Return on equity, %

financial leverage effect

%

2. Determine and analyze the effect of production leverage based on the following data:

Indicators | Enterprise 1 | Enterprise 2 | Enterprise 3 | |||

semi-fixed costs, | 30,000 | 54 000 | ||||

rub. | ||||||

Unit price, rub. | 3.0 | 3.0 | 3.0 | |||

Variables | expenses | on the | 2.0 | 1.5 | 1.2 | |

unit of production, rub. | ||||||

Volume | production | on | 40 000 | 40 000 | 40 000 | |

options, units | 60 000 | 60 000 | 60 000 | |||

80 000 | 80 000 | 80 000 |

3. To organize a new business, the company needs 200,000 rubles. There are two options:

1) issue of unsecured debt obligations in the amount of 100,000 rubles at 10% per annum, 100,000 ordinary shares with a par value of 1 ruble, 2) issue of unsecured debt obligations in the amount of 20,000 rubles

at 10% per annum, 180,000 ordinary shares with a par value of 1 ruble. Profit before payment of interest and taxes is planned in the amount of 60,000 rubles. The income tax rate is 20%. Determine the net earnings per share for each option.

4. We have the following information about ABC:

No. | Indicators | Rubles | |

Revenue from product sales | 30,000 | ||

Variable costs | 10,000 | ||

fixed costs | 5000 | ||

EBIT | 15,000 | ||

Amount of interest payable | for the use | 7000 | |

borrowed funds | |||

Income tax rate, % |

Determine the EGF, EPR, as well as the combined effect of these levers. 5. The company needs to increase its assets by $30,000. The following financing options are available:

a) issue of ordinary shares with a par value of 15 dollars, b) attraction of a bank loan at 10% per annum.

The company currently has a share capital of $15,000 ($10 per share), an EBIT of $5,000, and $10,000 in bonds at 8% per annum. The income tax rate is 20%. Determine the EPS value for each of the funding options.

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