White plc is a well established company that has recently been looking for companies to takeover. White plc has recently come across a company named Black plc which it is considering making an offer for in a possible acquisition. Information about Black plc . Black plc's earnings after tax for the year ending 2021 were 40 million and it currently reinvests in projects that offer a return of 11%. . Black plc currently has a beta factor of 1.2. Black plc currently reinvests 80% of its earnings, the rest it pays out in dividends. . Black plc is an ungeared company. The return on the market portfolio is currently 9% with the risk free return at 3%. The directors of White plc have been discussing at a recent board meeting how the corporate takeover should be financed. Three different proposals that have been put forward. Director A feels that the company has spare debt capacity and thus should consider debt financing and that the company could issue debentures and use the funds to finance the acquisition. Director B believes that the company should finance the takeover via a share exchange. The director feels that the current share price of the company is the highest it has ever been and that the company should take advantage of this. Director C believes that the takeover should be financed with a cash offer given the company is holding large quantities of cash in the bank. Director D believes that the company should also consider debt financing but with the intention of paying this back so as to restore company's original level of gearing. The director feels that this can be paid back in part by cutting dividends to zero, in effect becoming a non dividend paying company until the full amount has been paid back, after which it will revert back to paying dividends once again. Information about White plc. It is a geared company and presently its market value of equity is 3 billion, and the current market value of debt is 750 million. The company currently has a debt rating of AAA issued by Moody's with a current interest rate of 2% It is a low dividend paying company. It has a policy of paying out 5% of its earnings in dividends each year to its shareholders and has been doing this for many years. The company has an authorised share capital of 100 million ordinary shares of which it has issued so far 70 million shares. The current share price is 42.86 (quoted to 2 decimal places). The company currently has 670 million in cash in the company bank account. White plc currently has a beta factor of 1.8. B (i) The Chief Executive of White plc is keen for this acquisition to be successful. Provide a detailed report to the Chief Executive of White plc discussing the implications, impact, advantages and disadvantages of the four proposals from each of the directors along with your overall recommendations as to the best way to finance this corporate takeover. Your discussions and thus conclusion should be supported by evidence from empirical studies that have examined and studied such issues. [2200 words*]