Fill the blanks. Larry also holds 2,000 shares of common stock in a company that only has 20,000 shares outstanding. The company’s stock currently is valued at $42.00 per share. The company needs to raise new capital to invest in production. The company is looking to issue 5,000 new shares at a price of $33.60 per share. Larry worries about the value of his investment. Larry’s current investment in the company is $84,000. If the company issues new shares and Larry makes no additional purchase, Larry’s investment will be worth ______________. This scenario is an example of dilution. Larry could be protected if the firm’s corporate charter includes a preemptive right provision. If Larry exercises the provisions in the corporate charter to protect his stake, his investment value in the firm will become ______________.

Fill the blanks. Larry also holds 2,000 shares of common stock in a company that only has 20,000 shares outstanding. The company’s stock currently is valued at $42.00 per share. The company needs to raise new capital to invest in production. The company is looking to issue 5,000 new shares at a price of $33.60 per share. Larry worries about the value of his investment. Larry’s current investment in the company is $84,000. If the company issues new shares and Larry makes no additional purchase, Larry’s investment will be worth . This scenario is an example of dilution. Larry could be protected if the firm’s corporate charter includes a preemptive right provision. If Larry exercises the provisions in the corporate charter to protect his stake, his investment value in the firm will become .

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter8: Property Transactions: Capital Gains And Losses, Section 1231 And Recapture Provisions

Section: Chapter Questions

Problem 17P

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Larry also holds 2,000 shares of common stock in a company that only has 20,000 shares outstanding. The company’s stock currently is valued at $48.00 per share. The company needs to raise new capital to invest in production. The company is looking to issue 5,000 new shares at a price of $38.40 per share. Larry worries about the value of his investment. Larry’s current investment in the company is . If the company issues new shares and Larry makes no additional purchase, Larry’s investment will be worth . This scenario is an example ofdilution . Larry could be protected if the firm’s corporate charter includes apreemptive right provision. If Larry exercises the provisions in the corporate charter to protect his stake, his investment value in the firm will become
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