If EPS is 0 , what will be the EBIT of the company where Variable cost is 6/per unit for 10000 units, Non-operating Fixed cost is 9000 with tax as 50% and No Preference dividend and 5000 equity share of Rs 10/- eacha.0b.9000c.6000d.-9000
Question
If EPS is 0 , what will be the EBIT of the company where Variable cost is 6/per unit for 10000 units, Non-operating Fixed cost is 9000 with tax as 50% and No Preference dividend and 5000 equity share of Rs 10/- eacha.0b.9000c.6000d.-9000
Solution
To solve this problem, we need to understand the relationship between Earnings Per Share (EPS), Earnings Before Interest and Taxes (EBIT), variable costs, fixed costs, tax rate, and number of equity shares.
The formula for EPS is:
EPS = (EBIT - Interest - Taxes + Non-operating Income - Preference Dividends) / Number of Equity Shares
Given in the problem:
EPS = 0 Variable cost per unit = 6 Number of units = 10000 Non-operating Fixed cost = 9000 Tax rate = 50% Number of equity shares = 5000 No Preference Dividends
First, calculate the total variable cost:
Variable cost = Variable cost per unit * Number of units Variable cost = 6 * 10000 = 60000
Since EPS is 0, we can rearrange the EPS formula to solve for EBIT:
EBIT = (EPS * Number of Equity Shares) + Interest + Taxes - Non-operating Income + Preference Dividends EBIT = (0 * 5000) + 0 + (50% of EBIT) - (-9000) + 0 EBIT = 9000
So, the EBIT of the company is 9000. Therefore, the answer is (b) 9000.
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