Problem $2(5$ marks$)$

In $2021(3$ years ago$)$ years ago, you paid $$400,000$ for $10\%$ of the shares of Charleston

Corporation. The corporation has $9$ other shareholders each with a $10\%$ equity position in the

company. The corporation has grown over the past $3$ years and your shares are now worth

$$700,000.$ The corporation recently issued bonds in the amount of $$6,000,000$ to fund an

acquisition. The acquisition was a disaster, and the companylis now unable to meet its interest

commitments and is on the verge of bankruptcy. There are no other debts.

a$)$ As a $10\%$ shareholder, what is the maximum potential loss you could have if the

company declares bankruptcy? $(2$ marks$)$

b$)$ Explain how your answer would change if the company was a general partnership

instead? $(3$ marks$)$