Two companies RBS Limited and LRB Limited are identical in all aspects and belong to the same risk class. RBS Limited has 10% debentures and pays an interest amount of Rs. 1,50,000. The Operating Income (EBIT) of both the companies is Rs. 22,50,000. The equity capitalisation rate (Ke) for RBS Limited and LRB Limited is 14% and 12.5% respectively. What is the value of RBS Limited and LRB Limited? What is the overall capitalisation rate of RBS Limited and LRB Limited? If you hold equity shares worth Rs.22,500 in LRB Limited, how does the arbitrage operate and what will be the surplus left out with you after investing in RBS Limited? What is the crux of this argument on Capital Structure? (6+4+7+3) Maximum file size: 20MB, maximum number of files: 1