Explore BrainMass
Share

Explore BrainMass

    Dilution of ownership on sale of additional shares

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A common stockholder owns 30% of a firm's 1 million outstanding shares. The firm plans to sell 200,000 new shares.

    a) By how much is the stockholder's percentage ownership diluted if the firm sells all the shares to new investors.
    b) How should the stockholder maintain her 30% ownership interest?

    © BrainMass Inc. brainmass.com October 9, 2019, 11:59 pm ad1c9bdddf
    https://brainmass.com/business/accounting-for-corporations/dilution-of-ownership-on-sale-of-additional-shares-274927

    Solution Preview

    ANSWERS

    Requirement A
    Number of shares owned = 1 million x 30% = 300,000 shares
    Percentage ownership after issuance = ...

    Solution Summary

    Dilution of ownership on sales of additional shares are examined. The expert determines how a stockholder should maintain her 30% ownership interest.

    $2.19