Keep the Highest:/7 3. Rights and privileges of common stockholders arry Nelson
ID: 2780675 • Letter: K
Question
Keep the Highest:/7 3. Rights and privileges of common stockholders arry 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 company's True or False: The preemptive right allows Larry to purchase any additional shates sold by the company. This right will protect Larry from dilution in the value of the stocks he holds O False O True 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 $41.00 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 $32.80 per share. Larry worries about the value of his investment. Larry's current investment in the company is additional purchase, Larry's investment will be worth less. This scenario is an example of Larry could be protected if the firm's corporate charter includes a If the company issues new shares and Larry makes no provision. corporate charter to Assume that the market prce of existing shares does not change when the new shares areExplanation / Answer
1. True
2. 10%, (2000/20000 = 10%) ; dilution ; anti-dilution provision
3. USD 102,500 (if Larry excercise the provision, he stake(%) wont reduce in the company hence will stay at 10%, now 2,500 shares value of his investment = 2,500 x 41(market price of share) = 102,500
4. 15,001 (As its cummilative voting, shareholders have 20,000 x 5 (positions) votes = 100,000 but only 75% votes are caste, hence total 75,000 votes are cast. For selecting one board member 75,000 / 5 = 15,000 + 1(for majority)
5. 7,501 (As its majority procedure, total 20,000 votes will be cast(one vote per share). But as 75% votes are only cast. Total votes cast would be 15,000. For majority more than 50% votes should be cast. Hence 50% of 15,000 = 7,500 + 1 = 7,501
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.