You own shares representing 10% of Crypton Electronics Company. You paid $200,000 for these shares 4 years ago. The corporation has 9 other shareholders each with a 10% equity position in the company. The corporation has grown over the past 4 years and your shares are now worth $1,200,000. The corporation recently issued bonds in the amount of $5,000,000 to fund an acquisition. The acquisition was a disaster, and the company is 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? Explain. b) How would your answer change if the company was a general partnership instead?