Week 14 Discussion — Borrow, or Sell a Share? — Traditional alternative (no AI)

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Hook

The coffee cart wants a second cart, and its year-one statements say the cash is not there yet. This week you met money's three jobs, the banks and credit unions that hold it, the Federal Reserve, FDIC deposit insurance, and the two ways a business pays for growth: debt financing and equity financing. None of those tools makes the owner's choice for you.

Your discussion question — choose Option A or Option B; they carry the same weight and the same rubric, and you say which you picked.

Option A: The illustrative coffee cart needs 20,000 dollars for a second cart and holds 10,000 dollars of cash. It can borrow 20,000 dollars at 8 percent a year, which costs 1,600 dollars of interest a year and lifts debt-to-equity from 0.75 to 2.0, or sell a 25 percent share for 20,000 dollars, which costs no interest and has no repayment schedule but leaves the owner 75 percent of every future profit. Which should the owner choose? Take a side, use debt financing and equity financing (and debt-to-equity if it helps), name who gains and who gives something up, and state the strongest case for the other choice.

Option B: Picture a lean year in which the second cart earns little. Under the loan, the 1,600 dollars of interest and the repayment schedule still come due; under the share, the investor is owed no fixed payment but shares a quarter of whatever profit there is, in lean years and good ones alike. Which option better protects the people who depend on the cart, such as the owner, the cart leads and baristas, the lender, and the customers, and is protecting them the right test for this choice? Take a side, use debt financing, equity financing, and the idea of risk, name who gains and who gives something up, and state the strongest case for the other choice.

There is no single right answer. Two people can agree on every number in the case and still choose differently, because the choice rests on how they weigh a fixed yearly cost against shared ownership, and how they weigh the owner, the investor, the lender, the staff, and the customers. The figures are facts about an illustrative case; what the owner should do is a judgment, and nothing here is financial, legal, or tax advice about any real business or your own money. Pick the option you actually care about, and make your case.

Expectations

Activity format: one initial post followed by two substantive peer replies. Plan on about 45 minutes across the two deadlines; your instructor sets both due dates in Canvas.

Your initial post — by the first due date (early in the module week):

• Say which option you chose.
• For Option A, say whether the owner should borrow or sell the 25 percent share, and use the 1,600 dollars of interest, the 75 percent ownership, and the debt-to-equity readings to explain why; for Option B, say which option better protects the people who depend on the cart in a lean year, and whether that is the right test. For either option, name who gains and who gives something up.
• Use at least two of this week's terms (debt financing, equity financing, principal, ownership share, debt-to-equity, risk and return) correctly.
• State the strongest case for a view you do not hold, in one or two sentences.
• Length: roughly 150–250 words if written. You may instead record your post as audio or video (about two minutes) and attach a transcript; both forms are scored by the same rubric.

Your replies — by the second due date (the end of the module week):

• Reply substantively to at least two classmates.
• A substantive reply does more than agree: name a person the poster left out, show where a post calls debt free money or forgets that the investor becomes a second owner, point out where a post treats a lower debt-to-equity as proof on its own, or make the strongest fair case for the choice the poster rejected. "Good post!" on its own does not count.

What a strong post looks like:

I chose Option A and lean toward selling the share. The loan keeps the owner at 100 percent, but it costs 1,600 dollars a year in interest and lifts debt-to-equity from 0.75 to 2.0, so the cart would owe 2 dollars for each dollar of the owner's claim. The share costs no interest and drops the ratio to about 0.33. The owner gains breathing room in a slow year; the owner gives up a quarter of every future profit and becomes one of two owners. The strongest case against me is that a good second cart would make the loan cheaper over time, since interest is fixed while the investor's quarter keeps growing with profit. That is a judgment about the future, not a disagreement about the numbers.

Notice how it uses the case's facts, names the cost of each option in its own terms, names the people affected, and states a fair case for the other side without calling it wrong. That is the bar.

Participation rubric

This discussion is worth 10 points. The three criteria below look at your initial post and your peer replies.

Post early if you can — the best threads happen when people have time to reply before the second due date.

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