Capital Decision Problems

1. ABCD Corporation expects an Earnings Before Income Taxes (EBIT)of Php 9,000,000 every year for 10 years. BACD Corp currently has no debt, and its cost of equity is 17%. The firm can borrow at 1096. A new expansion that would increase EBIT to Php 12,000,000 a year will require Php200,000,000 worth of capital. What will you propose to ABCD Corp? Shall it continue with the expansion? If so, shall it borrow or iosue stocks? 2. II ABC Limited is buying regularly from DEF, a supplier, who gives a 2/10,n/30 discount. Its total purchases from DEF is Php 100,000,000 per year. However, II ABC doesn't have enough cash to finance forward expenses for the next 20 days if it will take advantage of the discount. Suppose II ABC can borrow at 7% per year, will you advise II ABC borrow money to take advantage of the discount? If so, what type of financing will you recommend that II ABC Lse