Diamond Drill Inc. has 150,000 shares and 15,000 warrants outstanding. A warrant holder can purchase a new share of stock for five warrants and $5.00 per warrant. The stock is currently selling for $27 per share. If all warrants are exercised, what will your fraction of ownership be if you owned 20,000 shares originally?

Question

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If all warrants are exercised, 15,000 warrants / 5 warrants per share = 3,000 new shares will be issued. This results in a total of 150,000 original shares + 3,000 new shares = 153,000 shares. If you owned 20,000 shares originally, your new fraction of ownership would be 20,000 / 153,000 = 13.07%.