Rights Issue Maintains Shareholder Control Without Debt Costs

Steps:

• Identify funding needs: Raise capital for project while avoiding high-interest debt and shareholder control dilution.
• Assess high interest rates: Rules out debt-based options to minimize costs.
• Evaluate control preservation: Prioritize methods keeping existing shareholders' proportional ownership.
• Match to options: Select approach allowing current owners to subscribe without new external investors.

Why B is correct:

• A fully subscribed rights issue offers new shares proportionally to existing shareholders first, per company law, ensuring they maintain control without dilution.

Why the others are wrong:

• A: Bonus issue capitalizes reserves but raises no new funds.
• C: Debentures create debt obligations with high interest payments.
• D: New share issue invites external investors, potentially shifting control.

Final answer: B