Company X and Company Y are in the same risk class, and are identical in every respect except that company X uses debt, while company Y does not. The levered firm has ₹4,50,000 debentures, carryng 10% rate of interest. B

Company X and Company Y are in the same risk class, and are identical in every respect except that company X uses debt, while company Y does not. The levered firm has ₹4,50,000 debentures, carryng 10% rate of interest. Both the firms earn 20% operating profit on their total assets of ₹7,50,000. Assume perfect capital markets, rational investors and so on; a tax rate of 35% and capitalisation rate of 15% for an all-equity company. Compute the value of company X and Y using the Net Income (NI) approach.