After successfully completing your corporate finance class, you feel the next ch
ID: 2757417 • 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 person voting for you. Schenkel has 405,000 shares outstanding, and the stock currently sells for $46. Assume that Schenkel uses cumulative voting, and there are four seats in the current election. How much will it cost you to buy a seat?
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 person voting for you. Schenkel has 405,000 shares outstanding, and the stock currently sells for $46. Assume that Schenkel uses cumulative voting, and there are four seats in the current election. How much will it cost you to buy a seat?
Explanation / Answer
% of stock needed = 1 / (n+1)
= 1/(4+1 )
= 1 / 5 = .2 or2 0%
number of shares needed to purchase = (405000*.20 )+ 1
= 81000+1 = 81001
cost to buy seats = 81001 * 46 = 3726046