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 ______________.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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 ______________.
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