Sec. 7] CAPITAL ACCOUNTS 77 The additional capital will first take the form of cash, but afterward, by the purchase of plant, equipment, ete., will be changed into these or other forms of wealth or property. We shall suppose, however, for the present, that in whatever form invested, the value remains exactly equal to the cost, namely, $100,000, so that the assets are changed from $300,000 to $400,000. $7 Let us assume that the books accurately represent actual values and correspond to market prices. After the newissue of stock, we find $200,000 of stock certificates representing $300,000 of actual value of capital, surplus and undivided profits, or $150 per share. But the new stock was, we assumed, issued to them at $100 a share. Hence the original stockholders will be able to make a profit on their new stock by buying at the issue price of $100 and then selling at $150; or they may shorten this operation by sell- ing their “right to subscribe” for $50. At first sight it would seem as though this right to subscribe represented a mysterious bonus to the stockholders, due to the issue of the new stock. It must be remembered, however, that the $100,000 par value of original stock certificates repre- sented, including the surplus, $200,000 worth of property belonging to the stockholders, consequently the original certificates were worth $200 per share. That is, the effect of issuing new stock below the original market price was to lower the value of the old stock from $200 per share to $150 per share. Consequently the loss of $50 to the stock- holders on their old stock will exactly compensate for the $50 of excess value represented in the rights to subscribe. An individual stockholder owning 10 of the original shares will find them worth, instead of $2000, only $1500, that is, he will lose $500. This will equal the profit of $500 on his 10 new shares or the value of his rights to subscribe for them. The outside public would be willing to pay