Question

Hallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase?

Answer 1

Answer:

2,000 shares

Explanation:

Hallie's preemptive rights allow her to buy up to 20% of the new stocks issued, so 20% of 10,000 is 2,000.

Preemptive rights give a shareholder the right to purchase a proportionate number of shares of future shares issued, this way the investor may keep the same ownership proportion.