You own 8,000 shares, or 5 percent, of Printers Ink stock. Your shares are valued at $279,280. By what percentage will the total value of your investment change if the company sells an additional 7,500 shares of stock at $33.50 a share and you do not buy any?

Question

Quizplus · Accepted Answer

First, calculate the market value of the company before the additional stock is sold:
$279,280 / .05 = $5,585,600

Next, calculate the market value of the company after the additional stock is sold:
($33.50 x 7,500) + $279,280 = $529,780
$529,780 / .10 = $5,297,800

The change in market value is:
($5,297,800 - $5,585,600) / $5,585,600 = -0.051, or -5.1%

Since you own 5% of the company, your investment will change by -5.1% x 0.05 = -0.255, or -0.18% to the nearest tenth of a percent. Therefore, the best choice is C, -0.18%.

You Own 8,000 Shares, or 5 Percent, of Printers Ink