Store-It Owns and Operates Self-Storage Units Across the Country

question 86

Multiple Choice

Store-It owns and operates self-storage units across the country. The firm is well established and has a cost of capital of 9 percent. Stop n Drive operates several stations which supply bread and
Milk along with gasoline, diesel, and kerosene fuels. Stop n Drive's cost of capital is 13 percent. Both
Companies are considering opening a chain of bakeries which would supply fresh baked goods for
Individual consumers. The internal rate of return on these bakeries is 11.5 percent. Which firm or
firms, if either, should open the bakery outlets?

• A) Store-It only.
• B) Stop n Drive only.
• C) Both Store-It and Stop n Drive.
• D) Either Store-It or Stop n Drive.
• E) Cannot be determined from the information given.

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Definitions:

Participating

In finance, it often refers to securities or investments that have the potential to share in additional earnings or payouts beyond a predetermined amount.

Non-cumulative

Referring to preferred stocks or dividends that do not accumulate or carry forward unpaid dividend amounts if they are not declared in a given period.

Preferred Stock

A category of corporate equity that takes precedence over common stock in terms of asset claims and earnings, typically offering stable dividend payments.

Par-value

The face value of a bond or stock as stated by the issuing company, which may differ from the market value.