Loki plc Kaplan kit

Locki plc is a growing company specializing in making accessories for mobile phones and tablets . the company is currently all equity finaced with 2 million ordinary shares in issue. The existing shareholders are mainly family members and friends. The directors of loki need to raise finance to fund a new factory and are considering a range of options including floatation and venture capital, future growth is anticipated to be following :

Earning next year = 0.25 m, expected to grow at 7%pa
dividend nect year = 0.14m expected to grow at 4%pa

Flotation
Q plc a listed company with similar business activities to loki has a P/E ratio of 9, an equity beta of 1.2 and gearig measured as debt:equity of 1:2. loki is expected to grow faster than Q plc atleast in short term

If floatation is approved then the issue share price would be set at 15% discount to fair value. the directors of Loki do not believe that an asset valuation is of much use here

Venture capital

The directors of loki have been in discussion with 4 Ts, a listed venture capital company. As well as contributing equity, 4Ts would seek to spread the risk of their investment by also investing in the form of 4 year 5% secured redeemable bonds and also covertible prference share. The risk adjusted return on similar bonds has been estimated at 6%. Corporation tax is 30%

Which 2 of the following statement concerning 4T’s perspective are correct

a)4T’s will accept a lower level of dividend on convertible preference shares compared to normal preference shares
b)4T’s are likely to prefer to use CAPM in valuing loki shares
c)Current shareholders would be willing to sell majority equity stake to 4T’s
d)4T’s investment in preference shares will have lowest risk out of 3 methods of finance offered due to option to convert

Sir correct ans is A and B. I have understood that why A is true and D is false. But I cannot understand that why C is false and B is true, can you please explain