Hallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase

Question

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Preemptive rights give existing stockholders the opportunity to maintain their proportional share of ownership in the company. If the investor currently owns 20%, she must be offered the opportunity to buy 20% of the new issue (10,000 shares x 20% = 2,000 shares).

Hallie Owns 20% of the Common Stock of the Bean