Originally Posted by Don Carlos
I'm planning to purchase a pair of $500 shoes next year from Reevolving, and would presumably finance the acquisition through some combination of cash, debt, and equity sale or transfer.
Reevolving's cash on hand is approximately $500, and let's assume mine is $100. I'm uncertain about the future, and particularly, about how the Fed's actions might affect my borrowing costs in the coming year. Furthermore, I've got a coming B&S sale in three months, and I am trying to sell $200 worth of merchandise in said sale; I'm estimating that I have about a 50% chance of achieving 100% sell-through of all inventory. Inventory unsold at this sale will be held in storage at a cost to me of $25 per month for the full lot (so we can consider this a fixed $25 monthly fee, with no marginal cost associated with n+1 items verus n items in storage).
You should use your $100 to buy a 20% equity stake in Reevolving's $500 shoes immediately, to get your foot in the door, so to speak. If your B&S sale goes well, you should gradually buy additional 5-10% lumps of equity in said shoes. Once you reach a point where you own close to a 50% steak in these shoes, you should consider a leveraged buyout. You can then use the income generated by the shoes (see above for more on 'leather goods in prostitution') to pay the interest payments.