Raisinkash plc is considering expanding their business and needs $2,000,000$ to finance this

expansion.

The company has total capital employed before the expansion of $15,000,000.$

The value of equity is currently $10,000,000$ and they pay an annual dividend of $1,000,000.$

The value of non$-$current debt is currently $5,000,000$ and they pay annual interest of $400,000.$

The company can raise the $2m$ by either:

Issue new shares

Secure new non$-$current debt

Borrow short$-$term at a cost of $11\mathrm{.}5\%$ per annum

Finding efficiencies in the management of working capital $($Inventories$,$ Receivables &

Payables$).$

Required:

a$)$ How much would each of the four options cost per annum given the information provided?

$[4$ Marks$]$

b$)$ For each of the four options what are the key points that should be considered?

$[16$ Marks$]$