Suppose a firm has a capital structure exclusively comprising of ordinary shares amounting to ₹10,00,000. The firm now wishes to raise additional ₹10,00,000 for expansion. The firm has four alternative financial plans:

(A) It can raise the entire amount in the form of equity capital.

(B) It can raise 50 per cent as equity capital and 50 per cent as 5% debentures.

(C) It can raise the entire amount as 6% debentures.

Further assume that the existing EBIT are ₹1,20,000, the tax rate is 35 per cent, outstanding ordinary shares 10,000 and the market price per share is ₹100 under all the four alternatives.

Which financing plan should the firm select and why?