If you own 700 shares (2% of a corporation's stock)and the corporation issues 19,000 new shares, how many of the new shares can you purchase under preemptive right?

Question

Quizplus · Accepted Answer

To calculate how many new shares you can purchase under preemptive right, you need to first calculate the total number of outstanding shares after the new shares are issued.

19,000 new shares + 700 existing shares = 19,700 total shares

Your preemptive right allows you to maintain your 2% ownership stake in the corporation. To calculate how many new shares you can purchase, you need to multiply 2% by the total number of outstanding shares after the new shares are issued.

2% x 19,700 total shares = 394 shares

Since you already own 700 shares, you can only purchase an additional 380 shares (394 - 700 = -306, which is less than 0 and therefore not possible).

Therefore, the answer is B) 380.

If You Own 700 Shares (2% of a Corporation's Stock)and