6. The capital structure of Moon Ltd. is given below:

` (in Lakh)

Equity Share Capital (`10 per share) 10.00 Retained Earnings 6.00 10% Preference Share Capital (`) 4.00 20.00 The firm has planned to undertake an expansion scheme of `10,00,000 which can be financed (i) entirely by issue of equity shares of `10 each, or (ii) by issue of 12%
Debentures of `100 each at par.
As a result of expansion, sales and operating fixed cost will increase by 60% and 75%
respectively. The other relevant information is given below:
Sales `50,00,000 Variable Cost 60%
Operating Fixed cost `5,00,000 Corporate Tax 40%
Calculate leverages and EPS before and after expansion and give your opinion for taking appropriate decision with respect to financing.