Alpha Ltd has currently equity share capital of ₹20 lakhs, consisting of 20,000 equity shares of ₹100 each. The management is planning to raise another ₹40 lakhs to finance a major program of expansion through one of the three possible financing plans. The options are as follows:
a) Entirely through equity shares of ₹100 each
b) ₹15 lakhs through equity shares of ₹100 each and ₹25 lakhs by issuing 14% debentures
c) ₹30 lakhs through equity shares of ₹100 each and ₹10 lakhs by issuing 15% preference shares.
The company's expected EBIT is ₹11,50,000. Assuming a tax rate of 25%, which plan would you advise?