After successfully completing your corporate finance class, you feel the next ch
ID: 2741111 • 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 Marine Enterprises. Unfortunately, you will be the only individual voting for you. If Marine Enterprises has 350,000 shares outstanding and the stock currently sells for $52, how much will it cost you to buy a seat if the company uses straight voting? Assume Marine Enterprises uses cumulative voting and there are five open seats in the current election; how much will it cost you to buy a seat now?
Explanation / Answer
Straight voting seat cost=stock price*[(total shares outstanding/2)+1]
=$9,1000,052
Cummulative voting seat cost=stock price*[(total shares outstanding/(no of open seat+1)+1]
=52*[(350000/6)+1]
=$3,033,385