Which financial plan shall be optimum for the company

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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 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%.

Question 1: Which financial plan shall be optimum for the company keeping in mind the assessment year 2020-21??

Reference no: EM132606707

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