During one business meeting at XYZ Ltd., one of the member pointed out that while evaluating the performance of any company one should not only see…

During one business meeting at XYZ Ltd., one of the member pointed out that while evaluating the performance of any company one should not only see its Operating Income but should also analyse its Capital structure as well. Weighted Average Cost of Capital changes on the basis of capital structure keeping all other factors unchanged. He presented data relating to 3 companies Alpha Ltd., Beta Ltd. and Gama Ltd. whose operating Income are equal, but their capital structure is different. The following information relating to these 3 companies is as follows: (in - 000) Alpha Ltd. Beta Ltd. Gama Ltd. Total invested capital 20,00,000 20,00,000 20,00,000 Debt/Assets ratio 0.8 0.5 0.2 Shares outstanding 61,000 83,000 1,00,000 Pre tax Cost of Debt 16% 13% 15% Cost of Equity 26% 22% 20% Operating Income (EBIT) 5,00,000 5,00,000 5,00,000 The Tax rate is uniform 35% in all cases. The industry PE ratio is 11X. Based on above case scenario, choose the most appropriate answer of the following: