Why Is the Preemptive Right Important to Shareholders

question 24

Multiple Choice

Why is the preemptive right important to shareholders?

• A)It allows managers to buy additional shares below the current market price.
• B)It results in higher dividends per share.
• C)It is included in every article of incorporation.
• D)It protects the current shareholders against a dilution of their ownership interests.

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Definitions:

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits one could have received by taking the alternative action.

Hybrid Cars

Vehicles that use a combination of at least one electric motor alongside a gasoline engine to propel the vehicle, offering improved fuel efficiency.

Motorcycles

Two-wheeled vehicles powered by an engine, often used for transportation or recreation.

Efficient Allocation

The distribution of resources in a way that maximizes the net benefit to society or achieves the best possible outcome based on certain criteria.