Paisley Brothers plc, a company producing paisley shirts, has net operating income of £2,000 and is faced with three options of how to structure its debt and equity:
(a) To issue no debt and pay shareholders a return of 9 per cent;
(b) To borrow £5,000 at 3 per cent and pay shareholders a return of 10 per cent;
(c) To borrow £9,000 at 6 per cent and pay shareholders a return of 13 per cent.
Assuming no taxation and a 100 per cent payout ratio, determine which financing option maximises the market value of the company.