Company A has 500,000 outstanding shares, with each share priced at $20. Company B has 300,000 outstanding shares, with each share priced at $40. You own 100 shares in Company A and 200 shares in Company B. After consolidation, how many new shares will you own in the consolidated Company AB?

To determine the number of new shares you will own after the consolidation of Company A and Company B, you would need to know the terms of the consolidation, specifically the exchange ratio of the new shares relative to the old ones. However, as this information is not provided, we'll have to make an assumption. Let's assume for simplicity that the consolidation happens on a basis proportional to the market capitalization of each company pre-consolidation.

First, calculate the pre-consolidation market capitalizations: - Company A: 500,000 shares * $20/share = $10,000,000 - Company B: 300,000 shares * $40/share = $12,000,000

The total combined market capitalization is $10,000,000 + $12,000,000 = $22,000,000.

Now calculate your ownership in each company before the consolidation: - In Company A: 100 shares * $20/share = $2,000 - In Company B: 200 shares * $40/share = $8,000

Your total value owned pre-consolidation is $2,000 + $8,000 = $10,000.

To find out how many shares you will own in the consolidated company, we need to know exchange ratio or some method of conversion. Since it isn't provided, we can consider your ownership in terms of the total market capitalization. Your ownership percentage of the combined company would be:

Ownership percentage = Your total value owned pre-consolidation / Total combined market capitalization = $10,000 / $22,000,000 = 0.00045454545 or 0.045454545%

If we say the combined company AB has the same market capitalization as the sum of both companies before consolidated ($22,000,000), and assuming that this market cap is maintained post-consolidation, your ownership percentage should theoretically remain the same. However, without a specific number of outstanding shares to be issued by the new company, we cannot determine the exact number of the new shares you would own. We need that information to complete the calculation.

Extra: When companies consolidate, they often issue new shares to represent the equity in the newly formed entity. Shareholders of the original companies receive shares in the new company according to a predetermined exchange ratio. This ratio dictates how many shares of the new company a shareholder will receive for each share they hold of the original companies. Market capitalization is an important consideration in these scenarios, as it represents the total value of all a company's shares of stock. It is equal to the share price times the number of outstanding shares. When two companies merge or consolidate, the new company's market cap is ideally the sum of the two original companies, but other factors might affect this.

Moreover, for students learning about this concept, consider market capitalization as the market's perception of the total value of a company's equity and remember that post-consolidation, the goal is for shareholders to maintain the same proportional stake in the new entity as they held in the original companies, unless there are specific reasons for a change in the relative valuations.