Question

Blackboard + →XCIO Remaining Time: 1 hour. 33 minutes. 49 seconds. Question Completion Status 4 5 7 Question 1 points Westland PLC is a British manufacturer of skateboards. You have been presented with the information about the company in Table 1 below, and have been asked to assist the finance director answer the questions below. 64 10 Table 1: Westland PLC financial information as of 31 December 2019 EBIT (milion GBP) Net Income million GOP Number of shares outstanding on million Degree of operating leverage Degree of financial leverage Degree of combined leverage 1.5 Required: A. Calculate the new EBIT for Westland PLC if its sales volume increase by 15.12 marks) B. Calculate the new EPS for Westland PLC if its EBIT increases by 56. (3 marks) TTTT Paragraph Arial 311200 ET... %DOQES T'T f. Machups - 1

Answer 1

in the question the giron information 95 EBIT ( million GBP) 64 Med income (minion GBP) lo 3 00 Number of share outstand Shore outstandiny (motion) Degree of operating coverage begree of financing learsonge Degree od combined leverage 1.5 4.5 Requidered are : A- EBIT chen sales increased by 15% Current EBIT =95 (given) we know operating leaverage= change in EBIT change in sales change in EBIT so 3 0.15 change in EBIT - 30.15 0:45

so new EBIT = 957457 = 137.75 = 137.75 milion GBP) B- wastland PLC A EBIT Calculation of Eps of increased by 5% we know + Finantat I change in EPS Degree of financial Icoverage = % change in Egit Degree of Tiranal leverage a 15 lrere so EPG 's change in 1.5 = 0.05 - 0.075 = 1.5 x 0.05 % change in EPS 1.5% = Net income 64 - 6:41 Current EPS lo Namber of share outstudy Charged (new) EPS = 6.4 +7.5% 6.880