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5. The Bharat Company and The Charat Company belong to the same risk class-these companies are identical in all respects except that The Bharat Company

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5. The Bharat Company and The Charat Company belong to the same risk class-these companies are identical in all respects except that The Bharat Company has no debt in its capital structure, whereas The Charat Company employs debt in its capital structure. Relevant financial particulars of the two companies are given below. (a) You own 10,000 worth of Bharat's equity. Show what arbitrage you would resort to. (b) When will, according to Modigliani and Miller, this arbitrage cease? 5. The Bharat Company and The Charat Company belong to the same risk class-these companies are identical in all respects except that The Bharat Company has no debt in its capital structure, whereas The Charat Company employs debt in its capital structure. Relevant financial particulars of the two companies are given below. (a) You own 10,000 worth of Bharat's equity. Show what arbitrage you would resort to. (b) When will, according to Modigliani and Miller, this arbitrage cease

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