2. A company has share capital of Kshs 20 million and is planning to invest an additional fund ofKshs 16,000,000 towards its expansion programme. Suggest the best option from thefollowing, from a tax point of view:1. To issue share capital of Kshs 16,000,000.2.To borrow Kshs 4,000,000 @ 18% pa and to issue debentures of Kshs 4,000,000 @ 11%pa and the balance amount be collected by issuing shares in the public.3.To issue debentures for Kshs 10,000,000 @ 11% pa and the balance be collected byissuing shares in the public.4. Rate of return is 30% before paying any interest and tax.Rate of tax is 30%

Budgeting options gives us a clear idea about the cost of capital raised in various way like share,…

Answered: A company has share capital of Kshs 20…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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