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?
Number of shares owned = 1 million x 30% = 300,000 shares
Percentage ownership after issuance = ...
Dilution of ownership on sales of additional shares are examined. The expert determines how a stockholder should maintain her 30% ownership interest.