A company is considering raising Rs 100 lakh by one of the two alternative methods, viz. 14 per cent institutional term
loan and 13 per cent non-convertible debentures. The term loan option would attract no major incidental cost. The
debentures would have to be issued at a discount of 2.5 per cent and would involve Rs 1 lakh as cost of issue. Advise
the company as to the better option based on the effective cost of capital in each case. Assume a tax rate of 35 per cent.
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in this ques i have taken tax rate at 50%.
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