1. Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? (For this question, think especially about the combined implications for Blaine of the lessons of Chapters 14, 15, and 16, noting with regard to Chapter 15 that the approximately $200 million in interest-bearing marketable securities that Blaine holds, together with their resultant $16 million or so in taxable interest income (in contrast to interest expense, which would be tax deductible) could be viewed from a Miller and Modigliani perspective as a "negative tax shield.")

Haley photocopying purchases a paper from an out-of-state vendor. average weekly demand for paper is 150 cartons per week for which haley pays $15 per carton. in bound shipments from the vendor average 1000 cartoons with an average lead time of 3 weeks. haley operates 52 weeks per year; it carries a 4-week supply of inventory as safety stock and no anticipation inventory. the vendor has recently announced that they will be building a faculty near haley photocopying that will reduce lead time to one week. further, they will be able to reduce shipments to 200 cartons. haley believes that they will be able to reduce safety stock to a 1-week supply. what impact will these changes make to haley’s average inventory level and its average aggregated inventory value?