222 TIN COMPANY (MAR/JUN 18)

A- V) USE CACULATION WHERE EQUITY FINANACE OR DEBT SHOULD BE USED?

to do so we have been given the industry gearing ratio i.e ( book value of debt/ book value of equity )

please check the solution

DOUBT 1) when calculation book value of equity we have taken into account the nominal value of additional share issed but we haven’t taken into account the increase in profit due to invesment being made why is that so?( there is a 20% increase in profit due to investment)