Week 14 — Borrow or Bring In a Partner: Financing a Laundromat's Second Location

Assignment 13 of the term — price a loan's yearly interest, read debt-to-equity after borrowing, weigh debt against equity, and explain it to someone new to business.

This adaptive assignment uses a coaching dialogue to help you turn a first attempt into a clear, checkable analysis. You remain the author. The coach asks questions, checks the work you show, and waits for you to revise before it produces the required report. This week's lecture tutorial, quiz, discussion, and Business Case Workshop practise the same ideas from other angles; this assignment is where you put debt and equity financing, ownership shares, debt-to-equity, and the funding request together on one small case.

The task

The case is illustrative, built for this course and not real data. A family-run laundromat wants to open a second location, and the washers and dryers for it cost 40,000 dollars. The owners have two offers: a lender will lend the 40,000 dollars at 6 percent a year, or an investor will pay 40,000 dollars for a 20 percent share of the business. The laundromat's year-end balance sheet shows total liabilities of 30,000 dollars and owners' equity of 50,000 dollars. Like the coffee cart in this week's chapter, the case has no named people.

The laundromat's figures, line by line:

• Second location's equipment: 40,000 dollars.
• Loan offer: 40,000 dollars at 6 percent a year.
• Investor offer: 40,000 dollars for a 20 percent share.
• Year-end total liabilities: 30,000 dollars.
• Year-end owners' equity: 50,000 dollars.

Work these two problems, showing every step of the arithmetic:

1. How much interest would the loan cost the laundromat in a year, in dollars?
2. If the laundromat takes the loan and the 40,000 dollars is added to its total liabilities, what would its debt-to-equity be?

Beside each answer, add a brief interpretation:

• Problem 1: classify each offer as debt financing or equity financing, name what each one costs (interest on a schedule, or a share of every future profit) and the owners' ownership share under each, and say what the interest means in a year when the new location earns little; then say which section of a business plan would carry this request for 40,000 dollars, and why a corporation could raise equity by selling stock while a sole proprietorship has no shares to sell.
• Problem 2: say what the ratio means in words, label which part of your reading is fact and which is judgment, and explain how taking the investor's money instead would change owners' equity rather than total liabilities, without declaring which offer is better.

Explain it to a non-expert

A friend who is saving to open a food stall asks you, "Why would anyone sell part of their business instead of taking a loan? You keep everything with a loan, so isn't it basically free money?" Write a 3–5 sentence message that explains, in everyday words, what a loan really costs and what selling a share really costs, and names one limit, including that the laundromat case is illustrative and that nothing in it is financial advice for a real business. More than one good answer is possible.

For a different, ungraded example, imagine a roommate who says, "My bank sold me a mutual fund, so it's insured like my checking account, right?" Model answer: "Deposit insurance from the FDIC covers deposits such as checking and savings accounts, not investments such as mutual funds, even when a bank sells them. The insurance is worded per depositor, per insured bank, for each account ownership category, up to 250,000 dollars. A mutual fund can go up or down in value, and no deposit insurance stands behind it. This is general education, so the FDIC's own pages are the place to check how the rule applies to a real account."

Use that pattern for your friend with the food stall, with your own wording and evidence.

Part 1 — Student instructions

1. Draft both answers, both interpretations, and your message to the friend before opening a chatbot.
2. Open any course-approved chatbot. Copy the entire Coach Prompt box, including its first and last marker lines, and paste it as one message. The coach will ask for your draft and then work one question at a time.
3. Reply in your own words. Show each step of the arithmetic when asked. Use the coach's feedback to revise at least one number or explanation, even if your first attempt was correct.
4. Continue until the prompt's exit condition is met.
5. Save the chat's share link and copy the final report exactly as the coach gives it.

The chatbot is a coach, not a ghostwriter. It must draw out your reasoning rather than write the work for you.

Coach Prompt

COPY EVERYTHING BELOW THIS LINE
ROLE: You are a careful learning coach for an introduction-to-business course. Draw out and challenge MY thinking about paying for growth: debt financing and equity financing, ownership shares, debt-to-equity, and the business plan's funding request. Do not write my assignment for me, do not invent work I did not show, never invent a statistic, a study, a survey, a quotation, or a current interest rate, never name or describe a real company, bank, investor, or fund, never recommend buying or selling any security, and never give me financial, legal, or tax advice about a real business or my own money.

ASSIGNMENT: Work through these two problems in order, one at a time. Do not invent, replace, or reorder a problem. The case: an illustrative family-run laundromat, built for my course and not real data. In this course, financial management is the work of planning how a business raises money and how it uses that money; debt financing is raising money by borrowing it, so the business must repay the principal with interest on a schedule whether or not it earns, while the owner keeps full ownership; equity financing is raising money by selling a share of ownership, so there is no interest and no repayment schedule, but the new owner shares every future profit; debt-to-equity is total liabilities divided by owners' equity, written as a plain decimal; a business plan's funding request states how much money the business needs, what the money will pay for, and where the owner hopes it will come from; and a computed ratio is a fact, while whether it is too high is a judgment.
PROBLEM P1: In the illustrative laundromat, the owners can borrow 40,000 dollars at 6 percent a year to equip a second location. How much interest would the loan cost in a year, in dollars?
PROBLEM P2: In the illustrative laundromat, the year-end balance sheet shows total liabilities of 30,000 dollars and owners' equity of 50,000 dollars. If the owners borrow 40,000 dollars and it is added to total liabilities, what would debt-to-equity be?
After the two answers, I must interpret each one: for P1, classify each offer as debt or equity financing, name what each costs and the owners' ownership share under each, say what the interest means in a year when the new location earns little, name the business-plan section that would carry the request, and explain why a corporation could raise equity by selling stock while a sole proprietorship has no shares to sell; for P2, say what the ratio means in words, label fact and judgment, and explain how the investor's money would change owners' equity rather than total liabilities, without declaring a winner. I must then write a 3-5 sentence message to a friend saving for a food stall who thinks a loan is free money, explaining what a loan costs and what selling a share costs and naming one limit, including that the case is illustrative and is not financial advice. I must explain technical terms in everyday words.

SCORING CRITERIA: Score only evidence I supply: correct numbers (20 points), financing reasoning (48 points), clarity for a non-expert reader (20 points), and showing the work so it can be checked (12 points). For each of P1 and P2, give 2, 1, or 0 evidence units per criterion; one unit is worth 5 number points, 12 reasoning points, 5 clarity points, or 3 showing-the-work points. Sum both problems within each criterion. Count my final message only with P2, not again with P1.
NUMBER UNITS: A correct amount = 2; an amount that is off because of one arithmetic slip or one missed line, with the work shown = 1; a missing amount or one with no work behind it = 0.
REASONING UNITS: For P1, BOTH the two offers classified as debt financing and equity financing, with each one's cost and the owners' ownership share named, AND the request tied to the business plan's funding request and to why a corporation can sell stock while a sole proprietorship cannot = 2; exactly one of those two parts = 1; neither = 0. For P2, BOTH the ratio read in words with fact and judgment labelled AND the investor's money explained as raising owners' equity rather than total liabilities, with no verdict, plus a friend's message that explains why a loan is not free money and names a limit = 2. If full P2 evidence is absent but at least one accurate substantive part appears, give 1. No accurate reasoning = 0; naming a term alone does not earn a unit, and calling a loan free money, treating the investor as a lender, treating a lower ratio as proof that one offer is better, or declaring a winner as if it were a fact is not accurate. An arithmetic slip alone is not a reasoning error.
CLARITY UNITS: For each problem, labelled evidence understandable to someone new to business, with technical terms explained = 2; intelligible evidence that needs rereading because of ambiguity or jargon = 1; absent or unintelligible evidence = 0. Include the final message with P2 if submitted. Missing reasoning alone does not lower clarity for otherwise clear submitted work.
SHOWING-THE-WORK UNITS: For each problem, the multiplication, addition, and division that lead to the amount, written out with their numbers = 2; some steps shown but the amount cannot be fully rebuilt = 1; an amount alone or no work = 0. Visible work stays checkable despite an arithmetic slip.

Do NOT invent grading rules.

DIALOGUE RULES: Ask exactly one question per message and wait for my reply. Start by asking for my complete first attempt. Build each next question from my exact words. Probe an unsupported claim and ask me to examine its evidence. Keep the conversation focused on questions rather than completed work.

ENGAGEMENT GUARDS: A greeting, copied prompt, yes/no reply, or one-word reply is not a substantive exchange. Do not flatter or accept agreement as evidence. Praise only a concrete move I made. If evidence is missing, say what is missing and ask for it. Require a real revision plus a short reflection on why the revision is better. Do not issue the report early.

EXIT CONDITION: Continue until at least five substantive exchanges have occurred AND I have supplied both amounts and their interpretations AND written my message to the friend AND revised at least one number or explanation AND reflected on the revision. Stop only after whichever requirement happens last.

REPORT: After the exit condition is satisfied, output exactly these labelled lines in this order. Replace X with the exact earned score and do not round it. Base every line only on evidence in this chat; write "Not supplied" for missing evidence and never raise the score for polished chatbot prose.
STUDENT'S SCORE: X/100
EVIDENCE FOR THE SCORE: [specific evidence from my numbers, work, and reasoning]
REVISION MADE: [what I changed and why]
STRENGTH: [one earned strength]
NEXT STEP: [one concrete improvement]
Then tell me to submit this report, my revised work, and the share link.
COPY EVERYTHING ABOVE THIS LINE

Deliverables

Submit these three items in the assignment entry:

• your revised work with both answers, their interpretations, and your message to the friend — written, or recorded as audio or video with a transcript, or as a labelled sketch of the laundromat's two offers side by side with a short note; every form is graded by the same scoring criteria;
• the coach's five-line report; and
• the conversation share link.

Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

Equivalent route (no AI required)

This route assesses the same Week 14 skills — pricing a loan's yearly interest, reading debt-to-equity after borrowing, classifying and weighing debt and equity financing, tying a request to the business plan's funding request, and explaining financing to someone new to business — for comparable time and effort, about 60 to 90 minutes, the same as the coached route. Complete the same two problems, both interpretations, and the message to the friend. Then audit your own first draft against the attached scoring criteria, criterion by criterion, and write a second draft. Add a 150–200 word revision memo that names one number or explanation you changed, the evidence that prompted the change, and one question you still have. Submit the revised work, your completed criteria checklist, and the revision memo in the assignment entry; together they replace the share link and the coach's report. This route uses the same scoring criteria and the same points, with no penalty for choosing it.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

The numbers, the work, the reasoning, the revision, and the final report must be your own. Do not ask the chatbot to create the assignment or add evidence you did not produce, and do not let it invent facts about the laundromat or any real company, bank, or investor. Submit an honest share link from your own dialogue. The equivalent route keeps the same workload and evidence and requires no AI account.

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