Question

Rust Pipe Co. was established in 1994. Four years later, the company went public. At that time, Robert Rust, the original owner, decided to establish two classes of stock. The first represents Class A founders' stock and is entitled to ten votes per share. The normally traded common stock, designated as Class B, is entitled to one vote per share. In late 2010, Mr. Stone, an investor, was considering purchasing shares in Rust Pipe Co. While he knew the existence of founders’ shares were not often present in other companies, he decided to buy the shares anyway because of a new technology Rust Pipe had developed to improve the flow of liquids through pipes.

Of the 1,750,000 total shares currently outstanding, the original founder's family owns 52,425 shares. What is the percentage of the founder's family votes to Class B votes? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Percentage of votes %

Answer 1

Answer :- Percentage of the founder's family votes to Class B votes = 30.88%

The founder family members holds Class A Stock and are entitled to 10 votes per shares.

So no. of founder's family votes = 52425 shares * 10 votes = 524250 votes

Shareholders holding B Class shares are entitled to 1 vote per shares.

So no. of Class B shareholders Votes = (1750000 shares - 52425 shares) * 1 vote = 1697575 votes

Percentage of vote = ( Founder family vote / Class B shareholder vote ) * 100

= ( 524250 / 1697575 ) * 100

= 30.88%