Number of shares: 410,000
Share price: $47
IF THE COMPANY USES STRAIGHT VOTING:
STEP 1: If the company uses straight voting, then the number of shares it should own would be half of the shares plus one share, in order to guarantee that the enough votes are received to win the election.
Number of shares needed = (Number of shares available for voting ÷ 2) + 1
Number of shares needed = (410,000 ÷ 2) + 1
Number of shares needed = 205,001
STEP 2: Total cost will be the product of share price and number of shares needed.
Total Cost = Share Price × Number of shares needed
Total Cost = $ 47 × 205,001
Total Cost = $ 9,635,047
<u>It will cost $9,635,047 if the company uses straight voting.</u>
IF THE COMPANY USES CUMULATIVE VOTING :
STEP 1: If the company uses cumulative voting, you need 1/(N+1) percent of stock plus one share to get maximum number of votes to win the election.
Percent of stock needed = [1 ÷ (N + 1)] * 100
Percent of stock needed = [1 ÷ (3 + 1)]* 100
Percent of stock needed = (1 ÷ 4) * 100
Percent of stock needed = 25%
So the number of shares purchased = (410,000 × 25%)
Number of shares purchased = 102,500
Total Cost = Number of shares purchased × Share Price
Total Cost = 102,500 × $47
Total Cost = $4,817,500
It will cost $4,817,500 if the company uses cumulative voting.
