Debt

Dominance co is considering raising some new finance but there is disagreement at board level how best to proceed
The managing director thinks that the company should retain control in the hands of the existing and loyal shareholders.The finance director feels that the gearing level should be allowed to increase to benefit from the tax relief allowed on interest.
the existing equity is quoted at $4.20 cum div with an imminent dividend of 16c due any day.the company earnings have grown at a fairly steady rate of 8% over recent year,but expectations are for growth to be 2% points better in the future.
The company’s debt is 4% irredeemable bonds,which were issued at a 5% discount of $95%.They have a nominal value of $100 but are currently quoted at $80 with the interest having just been paid.The corporation tax rate is 25%.

Assuming business wants to maximize the tax shield on the new finance, how should it raise the money

a)A placing of new shares and $10000000 of preference share
b)accepting a vc offer which includes $5000000 of 4% redeemable bonds and some shares
c)sell redeemable debt with a market value of $12500000 with interest at 5% , the redemption value will make up 25% of market value
d)sell $12000000 irredeemable debt with interest at 5.25%