SsgmentosStocks and Their Valuation 1. Rights and privileges of common stockhold

Question

SsgmentosStocks and Their Valuation 1. Rights and privileges of common stockholders Aa Aa Larry Nelson holds 1,000 shares of General Electric (GE) common stock. As a stockholder, he has the right to be involved in the election of its directors, who are responsible for managing the company and achieving the co objectives. mpany's can vote in person at the company's annual meeting, through the mail, or by transferring the right to vote to another person by means of transfer of ownership of shares O True O False 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 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. at $48.00 per share. The company needs to raise new capital to invest in . If the company issues new shares and Larry makes no Larry's current investment in the company is additional purchase, Larry's investment will be worth IMG 4516. This scenario is an example of Larry could be protected if the firm's corporate charter includes a provision. If Larry exercises the provisions in the corporate charter to protect his stake, his investment value in the firm will become

Explanation / Answer

True, a shareholder could use mail or proxy method of voting.

Larry's current investment in the company is 96000 (ie.2000*48).

Larry's investment will be worth $92160 (ie. 2400*38.40).

This scenario is an example of dilution. Larry could be protected ------ "pre-emptive right provision".

If Larry exercises the provisions in--------- the firm will become $115200 (ie. 2400*48).

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