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.
-Refer to the above scenario.If all warrants are exercised, what will your fraction of ownership be if you owned 20,000 shares originally?
A)12.12%
B)13.07%
C)13.33%
D)14.04%
E)Without knowing the exercise price the percent can not be determined.

Question

Quizplus · Accepted Answer

If all warrants are exercised, 15,000 warrants will convert into 3,000 new shares (15,000/5). The total number of shares will then be 153,000 (150,000 + 3,000). If you originally owned 20,000 shares, your fraction of ownership will be 20,000/153,000 = 13.07%.