Business Finance Example: • A Neighborhood hardware store is planning to add an

Business Finance Example:
• A Neighborhood hardware store is planning to add an equipment rental service to its business. It needs $30,000 to $40,000 to buy the rental equipment and expects rental sales of $3,000 to $3,500 per month. It rents its building with ten years remaining on its lease and has had stable total sales over the past several years.
This exercise provides an example of how the aspects of equity and debt discussed in the lecture relate to a business situation. Please answer the following questions when preparing your response. Students may include more discussion, but the following points should be covered.
o What is the hardware store’s capacity to support equity or debt financing?
o What mixture of debt and equity is appropriate to use?
o What are the likely sources? (refer to note)

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