Q9. Two firms A and B are identical in all respect except that B has Rs 500000 debt outstanding at a 6% rate of interest. The values of the two are given below. Assume that an investor owns 10% of A's shares. How can the investor obtain same return at a lower cost? Items Net operating Income Cost of debt, INT=KdD Net income, NI Equity capitalization rate, Ke Market value of equity, E Market Value of debt, D Total value of firm, V=E+D Overall capitalization rate, Ko X 150000 150000 .10 1500000 1500000 0.10 Y 150000 30000 120000 .15 800000 500000 1300000 0.1154