Viewing page 5 of 77

This transcription has been completed. Contact us with corrections.

4
[[strikethrough]]
3/ Deduct from Bakelite and Condensite in the result Cs/3 all earnings prior to 1914, and thus,
[[/strikethrough]]
We must look out here that the ratio Cs/3 does not put us in a disadvantage in paying out dividends at present or expending special money. Indeed capital included in P when it is expended as dividends will become 3 times smaller in our method of accounting if we divide Cs by 3. Therefore we cannot afford to divide by 3 otherwise we lose $2000 worth of stock in our allotment in the merger for every $3000 we distribute as dividends.
This is as far as our representation in the new company is concerned. If $1000 in the new company
[[end page]]
[[start page]]
5
invested as cash is worth more than $1000, than any money we withdraw is a loss in that proportion; furthermore it exposes us of diminishing our margin of control over the combined shares of Condensite and Redmanol.
On the other hand if we overlook above considerations there is every advantage of withdrawing dividends for the reasons that in doing so we "eat our pie and still keep 1/3 of it".
For instance if we withdraw from P (see former [[strikethrough]] book [[/strikethrough]] notebook on formula
    P + D + T - C
   ----------------  = Cs.)
          3
if we withdraw from P, say $15000 this diminishes by $15000 the amount of stock to which we are entitled in our relative ratio of distribution of the stock of the new company but [[strikethrough]] w [[/strikethrough]] the $15000 which was P