$($a$)$ has presented to you the following financial

details:

The company has undistributed reserves and surplus of Rs$.25$ Lacs. It needs

Rs$.55$ Lacs to modernise its plants. The company has sought your advice on

the following alternative modes of financing of raising finance:

Option A: Raise the entire amount as term loans from banks @ $11\%$ rate of

interest.

Option B: Raising part of the funds by issue of $1,00,000$ shares of Rs$.25/-$

each and the rest by a term loan @ $12\%$ rate of interest.

At what level of EBIT would the company be indifferent between the two

options and hence suggest which of the two options is better for the

company and why?