Question

Healthcare Lid. is a company engaged in production of organic food. Presently it sells its
products through indirect channels of distribution. The company is planning to start its own
show rooms and online portals. The financial manager suggested to use debt to invest in own
showrooms and online portals.
Company plans to raise debt capital of 340 lakhs through a loan from ICICI bank at 10% Interest.
The present capital base of the company is 9 lakhs equity shares of Rs.10 each. The rate of tax is 30%
In the context of above case-

Assuming expected rate of return same as current year, i.e., 15%, do you think the decision to
use debt is justified.
Show your working clearly.​

Answer 1

Answer:

I dont no but that question is very important

Answer 2

Yes, the decision to raise debt is justified

Explanation:

Pls refer to the pic attached below