Background: Portman Industries just paid a dividend of $2.00 per share. Portman expect the coming year to be very good, and its dividend is expected to grow by 15% over the year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 6.0% per year. The risk-free rate is 6% and the market risk premium is 4%. Portman's beta is 1.1 and their current intrinsic value is: $53.49. Questions: 1) Portman has 500,000 shares outstanding and Judy Davis, and investor, holds 40,000 shares. Suppose Portman is considering issuing 100,000 new shares at a price of $50 per share. If the new shares are sold to outside investors, how much will Judy's investment in Portman be diluted on a per-share basis? 2) Judy could be protected by dilution if the corporate charter contains a (pick one: bond indenture, preemptive right, takeover, proxy or founders share) provision. If Judy fully exercised that provision and avoided dilution, she would hold (pick one: 52,000 shares, 48,000 shares, 44,000 shares, 56,000 shares or 40,000 shares) worth (pick one: $2,539,600 , $2,590,400 , $2, 644,000 , $2,490,800 or $2,700,000) after the new stock issue.

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