Question

The shareholders of Bryant Power Corp. need to elect four new directors to the board. There are 13,700,000 shares of common stock outstanding, and the current share price is $10.50. If the company uses cumulative voting procedures, how much will it cost to guarantee yourself one seat on the board of directors? (Do not round intermediate calculations and round your answer to the nearest whole dollar, e.g., 32.)

    

Total cost

$

Answer 1

If the company uses cumulative voting, the board of directors are all elected at once.

You will need 1/(N+ 1) % of stock (plus one share) to guarantee election, where N is the number of seats up for election. So, the percentage of the company’s stock you need Percent of stock needed = 1 / (N+ 1)

Percent of stock needed = 1 / (4 + 1) = 0.20 or 20%

So, number of shares you need to purchase is : Number of shares to purchase = (13,700,000 × 0.20) + 1

Number of shares to purchase = 2740001

Total cost to you will be the shares needed times the price per share, or: Total cost = 2740001 * 10.50

Total cost = $ 28770010.5 or $ 28,770,011