Introduction and Formula for Indifference Point
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What is point of indifference ?
Point of EBIT where EPS for two different alternatives under consideration becomes equal
Point of Indifference formula
( ( EBIT - Interest )* ( 1 - tax ) - Pref dividend )/No. of SH
Financial Break Even point
That level of EBIT at which EPS = 0 i.e. EBIT = Interest + P.D./(1-tax)
Operating Break Even Point
That level of sales at which EBIT = 0 i.e. Sales = VC + FC