Suppose there are two alternatives to finance a power generation project planned by ABC (Pvt.) Ltd. Alternative A is to financing the total capital of Rs. 450 Mn with equity and Alternative B is to...

Extracted text: Suppose there are two alternatives to finance a power generation project planned by ABC (Pvt.) Ltd. Alternative A is to financing the total capital of Rs. 450 Mn with equity and Alternative B is to employ Rs.150 Mn equity, Rs. 100 Mn by 14% debentures and the rest by a 15% bank loan. The corporate tax rate is 30% and the owners expects 18% dividend in both alternatives. Earnings before interest and tax (EBIT) for the project is estimated as Rs.250 Mn. Evaluate two alternatives and advise ABC (Pvt.) Ltd. to select the best alternative.