Argo Tea is an organization, who operates in the plantation sector by engaging in the cultivation of tea and operating a chain of tea cafes across the world. Company was established thirty years ago by Mr. Josua Russel. Since then company has been growing tremendously and it is now a listed company on Tokyo stock exchange. They obtained the stock market listing through a Placement of shares and Mr. Josua Russel has held 38% of shares as at 31st December 2018 and the rest is owned by few numbers of institutional investors. Argo Tea with the expectation of expanding its operations abroad has decided to open few cafes in France and Germany in 2020. Chief Executive Officer of Argo Tea has requested for a detailed analysis of the investment from the Finance Director with possible finance sources. Following are some of the suggestions by the Finance Director to the Board on the investment. Perform an investment appraisal for the France and German regions separately as it involves consideration of foreign exchange risk Cut down the current dividend payout percentage to increase retention ratio Consider the option of entering in to franchise agreements Search for the opportunities of any financial assistance by the respective countries Considering the above suggestions, currently there exists a dilemma in the board about using debt financing and equity financing. Required:

I. Explain financial decisions with examples for each from the scenario given

II. Based on your knowledge of sources of finance, suggest suitable finance sources to finance the above expansion by Argo Tea.

III. The financial controller of Argo Tea is currently trying to convince the Board of Directors on the notion that pure equity financing is riskier than debt financing or any combination of financing sources. Do you agree with the opinion of the financial controller? Give reasons for your answer