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Bonbon limited is engaged in the …

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Bonbon limited is engaged in the business of manufacturing various kinds of biscuits. they produce 4 million packets of biscuit in a day. The company has the share capital of 20,00.000 divided into share of ₹100 each. For expansion purpose, the company required additional funds of 15,00,000. The management is considering the following alternative for raising the funds. ISO 22 Alternative 1: Issue of 10,000 equity share of 100 each. Alternative 2: Issue of 20% debenture of 20,00.000. The company's present EBIT is rupees 10 lakh per annum assuming the rate of return on investment remain the same after expansion which alternative should be used by the company in order to maximize the return to the equity shareholder. The tax rate is 50%. show the working.
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