Shoe Box Stores is currently an all-equity firm with 25,000 shares of stock outstanding. Management is considering changing the
capital structure to 35 percent debt. The interest rate on the debt would be 8 percent. Ignore taxes. Jamie owns 600 shares of Shoe Box Stores stock that is priced at $22 a share. What should Jamie do if she prefers the all-equity structure but Shoe Box Stores adopts the new capital structure?
Answer: d. Sell 210 shares and loan out the proceeds at 8 percent
Explanation:
Because the Firm wants to use a Debt to Equity Capital structure instead of an All Equity structure, she can lend money out at the company interest rate to NEGATE the conversion.
She can do this by selling 35% of her portfolio and loaning it out at 8%
35 % of her Portfolio would be,
= 0.35 * 600
= 210 shares
So she can sell 210 shares and loan at the proceeds at 8% to offset the Company's conversion
A product is a commodity when all units of production are identical, regardless of who produces them. However, to be a differentiated product, a company's product is different than those of its competitors. On the continuum between commodities and differentiated products are many degrees and combinations of the two.
Explanation: this quantity is allocatively inefficient because the marginal cost of producing the last lawnmower exceeds the marginal benefit to consumers.
A fixture is a work-holding or support device used in the manufacturing industry. Fixtures are used to securely locate (position in a specific location or orientation) and support the work, ensuring that all parts produced using the fixture will maintain conformity and interchangeability.
