1. Rights and privlleges of common stockholders AaAa Larry Nelson holds 1,000 sh
ID: 2780861 • Letter: 1
Question
1. Rights and privlleges of common stockholders AaAa 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 companys objectives True or False: Larry will receive dividends after preferred stockholders 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 at $50.00 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 $40.00 per share. Larry worries about the value of his investment. . 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 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 becomeExplanation / Answer
1) Larry will receive dividends after preferred stockholders. TRUE 2) Larry's current investment in the company is $100,000 (2000 shares * $50). If the company issues new shares and Larry makes to additional purchase, Larry's investment will be worth $96,000 (2000*$48) (Value of one share after the new issue = (20000*50+5000*40)/(20000+5000) = $48) 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 be = $120,000 (2000*$48)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.