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# Purchasing New Shares and Expected Capital Gain

Not a finance major and need assistance in computation.

Mr. Jim owns 1,500 shares of stock in Company X. Company X's 18,750 shares outstanding are publicly traded and come with a pre-emptive right. They are currently trading at \$27 a share. Company X is considering issuing 10,500 new shares to help finance the purchase of an additional plant and equipment. If Mr. Jim wishes to maintain his proportionate ownership in the company, what is the additional dollar amount he will be required to make assuming he can purchase the new shares from the company at a 5% discount?

The last observed dividend for Company Z before today was \$2.15. Dividends are growing at a constant rate of 8.5% annually. IF the required rate of return on the stock is 12.5%, what will be the total expected dollar capital gain per share on the stock three years from today? Assume dividends are paid annually.

#### Solution Preview

Mr. Jim owns 1,500 shares of stock in Company X. Company X's 18,750 shares outstanding are publicly traded and come with a pre-emptive right. They are currently trading at \$27 a share. Company X is considering issuing 10,500 ...

#### Solution Summary

This solution provides assistance determining the additional dollar amount Mr. Jim will be required to make assuming he can purchase the new shares from the company at a 5% discount, and the total expected dollar capital gain per share on the stock three years from today.

\$2.19