If DFL of a firm is 1.61 EBIT is Rs.25,000 and the interest component is Rs.7,000 the dividend on preference shares that the firm paid assuming a tax rate of $30 %$ is ____________.

Rs.1,730

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Rs.2,013

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Rs.2,595

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Rs.6,631

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Rs.9,945

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Solution

The correct option is A Rs.1,730
DFL = $\frac{E B I T}{E B I T - 1 - \frac{D_{p}}{(1 - t)}}$
DFL = $\frac{25, 000}{25, 000 - 7000 - \frac{D_{p}}{(1 - 0.30)}}$
$D_{p}$ = 1,730.

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If DFL of a firm is 1.61 EBIT is Rs.25,000 and the interest component is Rs.7,000 the dividend on preference shares that the firm paid assuming a tax rate of 30% is ____________.

The correct option is A Rs.1,730DFL = EBITEBIT−1−Dp(1−t)DFL = 25,00025,000−7000−Dp(1−0.30)Dp = 1,730.

If DFL of a firm is 1.61 EBIT is Rs.25,000 and the interest component is Rs.7,000 the dividend on preference shares that the firm paid assuming a tax rate of $30 %$ is ____________.

The correct option is A Rs.1,730
DFL = $\frac{E B I T}{E B I T - 1 - \frac{D_{p}}{(1 - t)}}$
DFL = $\frac{25, 000}{25, 000 - 7000 - \frac{D_{p}}{(1 - 0.30)}}$
$D_{p}$ = 1,730.