You own 5 % or 4,000 shares of Tonka, Inc. These shares have a total market value of $92,000. By what percentage will the total value of your investment in Tonka change if the company sells an additional 10,000 shares of stock at $21 a share and you do not buy any?

Question

Quizplus · Accepted Answer

The total value of your investment does not change because the number of shares you own and the market value of those shares ($92,000) remain the same. However, your ownership percentage in the company decreases because the total number of shares increases when the company sells an additional 10,000 shares. Before the sale, you owned 4,000 out of a certain number of shares (let's call this total X). After the sale, you own 4,000 out of (X + 10,000) shares. The question, however, asks about the percentage change in the total value of your investment, not the change in your ownership percentage. The total value of your investment remains $92,000 before and after the sale of additional shares, leading to a 0% change in the total value of your investment. The correct answer, based on the explanation provided, should reflect no change in the total value of your investment, which is a misunderstanding in the initial response.

You Own 5 % or 4,000 Shares of Tonka, Inc