Complete the Following Chart to Illustrate How Leverage Can Increase

question 85

Essay

Complete the following chart to illustrate how leverage can increase investors' returns while concurrently exposing them to large losses.
Facts: Calabria Corporation is a new company and has only one asset,its cash of $105,000 from the sale of common shares.
In scenario 1,Calabria invests the $105,000 in a venture that will pay out either $85,000 or $135,000 at the end of one year,depending on the success of the venture.
In scenario 2,Calabria borrows $210,000 at 7% interest and invests $315,000 in the same project outlined in Scenario 1.The payout will be $255,000 ($85,000 × 3)or $405,000 ($135,000 × 3)because it invests three times as much.

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A high-fidelity model used in healthcare education to simulate patient scenarios for clinical training.