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Queen Ltd has an investment proposal which is expected to yield a return of 12% The...

Queen Ltd has an investment proposal which is expected to yield a return of 12% The CEO is contemplating whether to go ahead with the proposal or not Following is the capital structure of the firm as per book value weights Equity capital -1.5 crore shares of Rs 10 each 12% Preference capital -1 lakh shares of Rs 100 each, 11% term loan of Rs 12.5 crore, 11.5% Debentures -10 lakh debentures of Rs 100 each and Retained earnings of Rs 20 crore The Company is expected to declare equity dividend at the rate of 36% next year The company is growing at the rate of 7% p.a. and is currently quoted at Rs 40 per share Debentures were issued 4 years ago for a tenure of 10 years and are currently trading at a rate of Rs.80 Preference shares redeemable in next 10 years are trading at Rs.75 per share The income tax rate is 30%
  
a) Advise the CEO if the investment proposal should be undertaken.

Note: solve using formulas and not on excel

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