Question: An Indian firm finds that by investing in a project is East Africa, its borrowing capacity will go up by Rs.50 million. If the firm's

An Indian firm finds that by investing in a project is East Africa, its borrowing capacity will go up by

Rs.50 million. If the firm's borrowing rate in India is 15% and the risk-free rate of interest is 6%, what

is the net benefit owing to the increased borrowing capacity? (Assume that the tax rate applicable is

30% in India and the life of the project is 5 years.)

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