Need help with this question from Fundamentals of Stock Market

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blackhat401_38700
blackhat401_38700's picture
Need help with this question from Fundamentals of Stock Market

Can you please provide step by step instructions on how to solve this problem from Stocks A lesson?

A, B, and C form a company and decide to issue 900 shares for $1 each. They have invested $100, $400, and $500 respectively. Calculate the number of shares allotted to C.

My understanding is that there are 1000 shares in total and they want to issue 900 shares. It is possible that A's 100 shares, B's 400 shares, and C's 400 shares get issued. So, why the answer is 450?

Jason Pride
Jason Pride's picture

Hello,

In the case of issuing shares, the par (face) value is not always considered. Since C made 50% of the initial investment he will also receive 50% of the initial stock issue, 450 shares. The remaining shares are split among A and B based on their initial investments for 90 (10%) shares and 360 (40%) shares respectively.

saame jone
saame jone's picture

hmmm