Scubapro Corporation currently has 500,000 shares outstanding and plans to issue 200,000 more shares in a seasoned equity offering.The current shareholders have preemptive rights on any new issue of stock by Scubapro Corporation.An investor with 20,000 shares who exercises his preemptive rights on the new stock issue will have the right to buy how many stocks?

Question

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The investor currently owns 20,000 out of 500,000 shares, which is 4% of the company. To maintain this ownership percentage after the new issue, the investor can buy 4% of the 200,000 new shares, which is 8,000 shares.

Scubapro Corporation Currently Has 500,000 Shares Outstanding and Plans to Issue