3. 4. Other costs • Fixed interest costs: R190 000 Preference dividends: R55 000 Ordinary shares • 50 000 shares in issue 5. EBIT/EPS Units sales level EBIT EPS The applicable tax rate is 27%. 235 000 180 000 457 500 660 000 3.3 9.14 Santiago Ltd is a company operating in the manufacturing sector. The company manufactures energy saving globes. The company is considering a major expansion project that requires significant investment in new machinery and equipment. As the financial manager of Santiago Ltd., you have been tasked with analysing the project's financial viability and determining the optimal capital structure for funding the expansion. The following additional information has been provided to you: 1. EBIT-EPS Coordinated Debt ratio 0% 40% 80% 2. Product information EBIT R500 000 EPS (R) 36.00 18.00 0.00 EBIT R1 000 000 EPS (R) 72.00 45.00 90.00 Sales: 235 000 units last month at a selling price of R16.00 per unit. Variable cost per unit: R7 Fixed costs: R600 000

3. 4. Other costs • Fixed interest costs: R190 000 Preference dividends: R55 000 Ordinary shares • 50 000 shares in issue 5. EBIT/EPS Units sales level EBIT EPS The applicable tax rate is 27%. 235 000 180 000 457 500 660 000 3.3 9.14 Santiago Ltd is a company operating in the manufacturing sector. The company manufactures energy saving globes. The company is considering a major expansion project that requires significant investment in new machinery and equipment. As the financial manager of Santiago Ltd., you have been tasked with analysing the project's financial viability and determining the optimal capital structure for funding the expansion. The following additional information has been provided to you: 1. EBIT-EPS Coordinated Debt ratio 0% 40% 80% 2. Product information EBIT R500 000 EPS (R) 36.00 18.00 0.00 EBIT R1 000 000 EPS (R) 72.00 45.00 90.00 Sales: 235 000 units last month at a selling price of R16.00 per unit. Variable cost per unit: R7 Fixed costs: R600 000

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 24DQ

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