Question

Question 3
N.
X Ltd. (a domestic company) requires a sum of Rs. 2,00,00,000 to finance its expansion
plans. It is considering the following options:
1. Raise Rs. 80,00,000 by way of equity and Rs. 1,20,00,000 by way of debentures @
15% p.a.
2. Raise Rs. 1,20,00,000 by way of equity and Rs. 80,00,000 by way of debentures @
15% p.a.
Rate of return on capital employed is 20% p.a. and effective tax rate for the company is 26%.
Which financial plan shall be optimum for the company keeping in mind the assessment year
2020-21?​

Answer 1

Answer:

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