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'A' Ltd. and 'B' Ltd. are identical in every respect except capital structure. 'A' Ltd. does not employ debts in its capital structure whereas 'B'

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'A' Ltd. and 'B' Ltd. are identical in every respect except capital structure. 'A' Ltd. does not employ debts in its capital structure whereas 'B' Ltd. employs 12% Debentures amounting to 10 lakhs. Assuming that: i. All assumptions of M-M model are met; ii. Income-tax rate is 30%; iii. EBIT is 2,50,000 and iv. The Equity capitalization rate of 'A' Ltd. is 20%. Calculate the value of both the companies and also find out the weighted Average Cost of Capital for both the companies

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