Preemptive Right. Barker Compa

Preemptive Right. Barker Company has 400,000 shares of common stock outstanding and is considering issuing another 100,000 shares through stock rights. Each current stockholder will obtain one right per share. Mr. A owns 40,000 shares of common stock.

                (a) What amount of each new share of common stock can a stockholder acquire by each right? (b) How many rights are required to purchase one new share of common stock? (c) How many new shares will Mr. A be able to obtain? (d ) What will Mr. A’s percentage interest in the company be after exercising all his rights? (e) Did his percentage ownership change after exercising his rights relative to what it was before the rights offering?

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