You Make the Call-Situation 2

Essay

You Make the Call-Situation 2
Carter Dalton is well on his way to starting a new venture-Max, Inc. He has projected a need for $350,000 in initial capital. He plans to invest $150,000 himself and either borrow the additional $200,000 or find a partner who will buy stock in the company. If Dalton borrows the money, the interest rate will be 6 percent. If, on the other hand, another equity investor is found, he expects to have to give up 60 percent of the company's stock. Dalton has forecasted earnings of about 16 percent in operating income on the firm's total assets.