why? QUESTION TWO A. Twabo Limited and KenCore Limited need to raise funds. Twabo Limited is a high teck company which is in high growth business, with good prospects for future projects. The business is volatile and cash flows are difficult to predict. On the other hand, KenCore is a chain store operating in a stable mature industry. i. All things being equal, which of the two companies should borrow more and [5 marks) Consider Twabo Limited only. The owners hold 55% of the issued share capital. How does this affect the decision to raise funds through equity? (10 marks] B. "Preference shares are a hybrid of debt and equity and contain the best features of each as far as the issuing company is concerned. It follows that companies should make extensive use of preference shares for their long term financing requirements." Discuss. [10 marks] [TOTAL: 25 MARKS] ii. IN. Page 2 of 11