Gangnam Bhd. is considering expanding its business by adding new stores. However, Gangnam lacks adequate financing to continue the project. $10 million is needed for this purpose. The expansion can be financed by issuing either ordinary shares or bonds. The new ordinary shares are selling at $80 per share whereas the bonds are issued at a 12% coupon rate. The companys corporate tax is 30%. The financial statement of Gangnam Bhd. is as follows:

Gangnam Bhd.
Balance Sheet as at 31 December 2018 ($)
Current Assets	6,000,000
Fixed Assets	8,000,000
Total Assets	14,000,000
Current Liabilities	2,500,000
Bonds :
(17%, $1000 par value)	2,000,000
(8.5%, $1000 par value)	3,000,000
Preference Shares:
($100 par value)	600,000
Ordinary shares
($4 par value)	600,000
Retained Earnings	5,300,000
Total Liabilities and Equities	14,000,000

If the EBIT is expected to be at $7,000,000, which financing plan should be selected?