1. Jacques Smith holds 1,000 shares of General Electric’s (GE) common stock. The
ID: 2779359 • Letter: 1
Question
1. Jacques Smith holds 1,000 shares of General Electric’s (GE) common stock. The annual stockholder meeting is being held soon, but as a minor shareholder, Jacques doesn’t plan to attend. Jacques did not sell his shares but gave his voting rights to the management group running General Electric (GE). Jacques must have signed a __________ that gives the management group control over his shares.
a) proxy
b) poison pill
c) preemptive right
d) corporate charter
2.
Jacques 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 $49.00 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 $39.20 per share. Jacques worries about the value of his investment.
A) Jacques’s current investment in the company is ______________.
B) If the company issues new shares and Jacques makes no additional purchase, Jacques’s investment will be worth ____________.
Explanation / Answer
1. The answer is option "a" - proxy. By using proxy, Jacques is authorizing the management group of GE to cast votes on his behalf. By using proxy, Jacques has made the management group of GE his agent and they can act on his behalf.
2. a Jacques's current investment = number of shares*current value = 2,000 shares*$49 = $98,000
b. Total share capital of the company after new issue = 20,000*49+5,000*39.20 = 980,000+196,000 = $1,176,000
Average value per share = 1,176,000/(20,000+5,000) = 1,176,000/25,000 = $47.04 per share
Value of Jacque's investment = number of shares*$47.04 = 2000 *47.04 = $94,080
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