Problem

Carmon Company invested $300,000 in the equity securities of Mann Corporation. The current...

Carmon Company invested $300,000 in the equity securities of Mann Corporation. The current market value of Carmon’s investment in Mann is $250,000. Carmon currently needs funds for operating purposes. Although interest rates are high, Carmon’s president has decided to borrow the needed funds instead of selling the in­vestment in Mann. He explains that his company cannot afford to take a $50,000 loss on the Mann stock. Evaluate the presi­dent’s decision based on this information.

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