Who can help me with this question? The first one is who's statement is correct? The second is what's the required rate of return on the air planes?

In April 2016 the management team of ABC airlines met to discuss a proposal to purchase five short haul aircrafts at the total cost of 25 million. The new aircrafts were expected to generate an annual cash flow of 4 million for 20 years. The focus of the meeting was in how to finance the purchase. ABC had 20 million in cash and marketable securities, see table. Anne, the Chief Financing Officer (CFO), pointed out that the company needed 10 million in cash to meet the day to day demands of the business and as a contingency reserve. This means that there will be cash deficit of 15 million for the purchase of aircrafts, which the company need to cover either by the sale of common stock or by additional borrowing. While admitting that the arguments were finally balanced Anne recommended an issue of stock. She pointed out that the airline industry was subject to wide swings in profits and the firm should be careful to avoid the risk of excessive borrowing. She estimated that in market value terms the longterm debt ratio was about 59% and that a further debt issue would increase the ratio to 62%. Anne's only doubt about the stock issue was that the investor might jump to the conclusion that the management believed that the price was overvalued, in which case the announcement might prompt an unjustified sell off by the investors. She stressed therefore that the company needed to explain carefully the reason for the issue. Also, she suggested the demand for the issue will be enhanced if at the same time ABC increased its dividend payment. This will provide a tangible evidence of management's confidence in the future. These arguments cut little ice with Jeffrey, ABC's Chief Executive (CEO). He said, \"I know that you are the experts in all of this, but everything you have said flies in the face of common sense. Why should we want to sell more equity when our stock has fallen in the past year by nearly a fifth? Our stock is currently offering a dividend yield of 6.5%, which makes equity an expensive cost of capital. What's more, I don't see the point of paying out more money to the shareholders at the same time we are asking them for cash. If we increase the dividend, we will need to increase the amount of the stock issue; so we will just be paying the higher dividend out of the shareholder's own pockets. You are also ignoring the question of dilution. Our equity currently has a book value of 12 per share; it's not playing fair with the current shareholders if we now issue stock for around 10 per share. \"Look at the alternative. We can borrow today at 6%. We get a tax break on the interest, so the aftertax cost of borrowing is 3.9%. That's about half of the cost of equity. We expect to earn a return of about 15% on these new aircrafts. If we can raise money at 3.9% and invest it at 15%, that's a good deal in my book.\" \"You finance experts are always talking about risk, but as long as we don't go bankrupt, borrowing doesn't add any risks at all. I don't want to push my views on this - after all you are the expert. We don't need to make a firm recommendation to the board until next month. In the meantime, why don't you get one of your finance graduates to look at the whole issue on hoe we should finance the deal and what return we need to earn on the planes?\" Summary of Financial Statement for ABC Plc airline, 2015 Balance Sheet (Figures are Book Value in millions of pounds) Liabilities Bank debt Other current liabilities 10%, bond, due 2033* Shareholder's equity Total Liabilities Income Statement Gross Profit Depreciation Interest Pretax profit Tax Net profit Dividend * The yield to maturity on ABC's debt currently is 6% ABC has 10 million shares outstanding, with a market price of 10 a share. ABC's Equity beta is estimated at 1.25. The market risk premium is 8% and the Government Guilds rate is 3%. Required 1. Who's statement is correct? 2. The required rate of return on the new planes