Problema Solution
An acquaintance of one of the authors was about to take his startup internet company public. He owned 5% of the 900,000 shares of stock that were issued when the company was first formed.
The board of directors decided to reward him by issuing additional stock so that he would then own 10% of the company. How many new shares of stock should be issued and then rewarded to him?
Answer provided by our tutors
He owned 5% of 900,000 or 0.05*900,000 = 45,000 shares
Let the extra shares alloted be X.
The new ratio is 10% (10/100 = 0.10 as a decimal):
(X + 45,000)/(X + 900,000) = 0.10
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click here to see the equation solved for X
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X = 50,000 shares
They have to issue him 50,000 new shares.