In the year 2016 ABC company is in need of

In the year 2016 ABC company is in need of extra funds of $500,000. It has three options( share capital, debt securities or a mix of both). Details of options available to the company are given in the following table:

description                                                option 1            option 2           option 3

preferance share capital 5%                   200000              100000

equity share capital @10                         300000             150000            250000

debenture 5%                                                                    250000            250000


Net Income for 2016 before interest is $300,000, tax rate applicable for 2016 is 40%.


Required:

Based on the above Information, which option company should go with? Explain why?  


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