Allen owns 50 of the 500 shares outstanding of General Myopics. GM plans to issue 500 new shares. If Allen has preemptive rights, he may:

Question

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Preemptive rights allow existing shareholders to maintain their proportional ownership in a company when new shares are issued. Since Allen owns 10% of the current shares (50 out of 500), he has the right to buy 10% of the new shares being issued (50 out of 500) to maintain his percentage of ownership.

Allen Owns 50 of the 500 Shares Outstanding of General