According to Traditional approach, compute the market value of the firm, value of shares and the average cost of capital from the following information:

Net Operating Income 1,00,000

Total Investment 7,00,000

Equity capitalization Rate:

(a) if the firms uses no debt 7%.

(b) if the firm uses Rs. 2,00,000 debentures 8% (c) if the firm uses Rs. 4,00,000 debentures 9%

Assume that Rs 2,00,000 debentures at 6% rate of interest whereas Rs.

4,00,000 debentures at 6% rate of interest whereas Rs. 4,00,000 debentures at 7% rate of interest. (Ans. 7%, 7.69%, 8.33)