Recurring to the notation employed in note 2, page 168, and letting Um= unit of material efBcleocy, then a given established concern, A, with a given equipment [7,i{cap)«<* PiCcap) ** ^.(oap) * Kf v— J,
presently finds Iteell In compeUtion witb a younger concern, B, having ui eqniTalent material equipment — f«(cap)i procured at a lower cost and requiring lower earnings (= ea') and lower fixed charges.
l/^(eiip)t'>U,(— = g»-'^^'\ = U-.(cap'= cap - Acap). \inl inl /
But Ern(oap)i= [7'„(cap)t as competitors in the market. Hence, with the competitive lowering of earnings, and therefore of effective capitalization, A's account oomes to slAnd ; —
(7,(cap).='f,(cap') = r7.{cBp- 4cap)< (7.(cap). In eSect A Is overcapitalized by Cr.(cap — cap'). A's nominal capital, tt,(cftp),™[7,(cap'+Acap), while A's effective capitaliiatlon
0',(cap'),= f.Ccap — A cap). The bnaiaesB man's sensibilities in the case,