Bookmarks People Window Help xAplia: Student Question C Robert Gilliman, An Equi

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Bookmarks People Window Help xAplia: Student Question C Robert Gilliman, An Equity Rese x https://courses.aplia.com/af/servlet/quiz?quiz action takeQuiz&quiz;_probGuid-QNAPCOA8010100000041ca2680040000 Stocks and Their Valuation Graded Assignment | Read Chapt er 9 Back to Assignment Due Sunday 06.24.18 at 11:45 PM Attempts Keep the Highest: /6 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 thlection of its directors, who are responsible for managing the company and achieving the company' objectives. True or False: Larry will receive dividends after preferred stockholders 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 $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. Larry's current investment in the company is additional purchase, Larry's investment will be worth If the company issues new shares and Larry makes no 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 23

Explanation / Answer

1. True; As he is a common equity stockholder.

2. Current Investment = 2,000 x $50 = $100,000

3. Total Share Capital = [($50 x 20,000) + ($40 x 5,000)] = $1,200,000

Per Share Price = $1,200,000/25,000 = $48

So, Nelson's Investment worth = $48 x 2,000 = $96,000

4. Dilution

5. Prememptive right

6. He still owns 10% of the company and hence has averted dilution

hence, New investment value = $100,000 + (500 x $40) = $120,000

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