A company has operating income of Rs 50,000. It has Rs 1,00,000 of debt carrying 10% interest rate. The equity capitalisation rate is 20%. Indicate the market value of the firm assuming no taxes. The...

A company has operating income of Rs 50,000. It has Rs 1,00,000 of debt carrying 10% interest rate. The equity capitalisation rate is 20%. Indicate the market value of the firm assuming no taxes.

The amount of capital is Rs 1,00,000, EBIT is 20%, the tax rate is 30%, and the interest rate is 10%. Find the return on equity if:

(i) capital is all-equity

(ii) debt-equity ratio is 60:40