XYZ Ltd., expects a net income of Rs. 1,50,000. The company has 10% of 5,00,000 Debentures. The equity capitalization rate of the company is 10%.

(a) Calculate the value of the firm and overall capitalization rate according to the net income approach (ignoring income tax).

(b) If the debenture debt is increased to Rs. 7,50,000 and interest of debt is change to 9%. What is the value of the firm and overall capitalization rate? (Ans. (a) Rs. 15,00,000, 10% (b) Rs. 15,75,000 and 9.52%)