After successfully completing your corporate finance class, you feel the next ch
ID: 2651563 • Letter: A
Question
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you.
If Schenkel has 450,000 shares outstanding and the stock currently sells for $43, how much will it cost you to buy a seat if the company uses straight voting? (Do not round intermediate calculations.)
Assume that Schenkel uses cumulative voting and there are three seats in the current election; how much will it cost you to buy a seat now? (Do not round intermediate calculations.)
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you.
Explanation / Answer
under straight voting, you have number of votes equal to number of shares you have and you vote on each director seat separately whereas In cummulative voting numbe rof votes you have is number of shares you have times the number of director's seats there.
a)Total cost =Number of shares * current price
= 450000*43
= $ 19,350,000
b)Total cost = Numer of share*Number of directors*current price
= 450000*3*43
= $ 58,050,000