Question

You want a seat on the board of directors of Zeph, Inc. The company has 235,000 shares of stock outstanding and the stock sells for $60 per share. There are currently 5 seats up for election. If the company uses cumulative voting, how much will it cost you to guarantee that you will be elected to the board?

Answer 1

Answer:

2,350,060

Explanation:

The computation of total cost is shown below:-

Shares to be controlled = (Total number of shares × Number of directors needed) ÷ (Total number of directors that will be elected  + 1) + 1

= (235,000 × 1) ÷ (5 + 1) + 1

= 235,000 ÷ 6 + 1

= 39,166.67 + 1

= 39,167.67

Total cost = Shares to be controlled × Stock sells per share

= 39,167.67 × $60

= 2,350,060

So, for computing the total cost we simply applied the above formula.