Question

Question 8
Teerath Ltd. is a widely held company. It is currently considering a major expansion of its
production facilities and the following alternatives are available:
Particulars
Alt-1
Alt-2
Alt-3
(Rs.)
10,00,000
(Rs.)
20,00,000
Share capital
(Rs.)
50,00,000
14% Debentures
15,00,000
20,00,000
18% Loan from Bank
25,00,000
10,00,000
Expected rate of return before tax is 30%. Rate of dividend of the company since 2000 has
not been less than 22% and date of dividend declaration is 30th June every year.
Corporate tax rate is 30%. Which alternative should the company opt with reference to
tax planning?
​

Answer 1

Answer:

50,00,000

14% Debentures

15,00,000

20,00,000

18% Loan from Bank

25,00,000

10,00,000

Expected rate of return before tax is 30%. Rate of dividend of the company since 2000 has

not been less than 22% and date of dividend declaration is 30th June every year.

Corporate tax rate is 30%. Which alternative should the company opt with reference to

tax planning?

Explanation:

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