NOPREM Inc. is a firm whose shareholders don't possess the preemptive right. The firm currently has 1,000 shares of stock outstanding; the price is $100 per share. The firm plans to issue an additional 1,000 shares at $90.00 per share. Since the shares will be offered to the public at large, what is the amount per share that old shareholders will lose if they are excluded from purchasing new shares?
A) $90.00
B) $ 5.00
C) $10.00
D) $ 0
E) $ 2.50

Question

Quizplus · Accepted Answer

The old shareholders will lose $5.00 per share if they are excluded from purchasing new shares. This is because the new shares are being issued at a price of $90.00 per share, which is below the current market price of $100.00 per share. As a result, the old shareholders will have to pay more for the new shares if they are not able to purchase them at the offering price.