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Sindrei [870]
3 years ago
7

Raul wants to join the directors of World Trade but currently owns no shares in the company. He knows that no one else will help

elect him. Assume there are 46,000 shares outstanding at a market price of $12.80 a share. What is the minimum amount Raul must spend to acquire a seat on the board of directors if there are three open seats and straight voting applies?
Business
1 answer:
erica [24]3 years ago
7 0

Answer:

$294,412.8

Explanation:

In order to obtain a seat on the board of directors, Raul must hold more than 50 percent of the total number of outstanding shares if there are three open seats and straight voting occurs.

Total number of shares required = (46,000 ÷ 2) + 1

= 23000 + 1

= 23,001 shares

Market price of share = $ 12.80

Total amount = Total number of shares required × Market price of share

= 23,001 × $ 12.80

= $294,412.8

The amount Raul wants to invest on obtaining a seat on board of directors is $294,412.8

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The required rate of return is 7.20%

Explanation:

The price of a share that pays a particular dividend amount in perpetuity is given by the below formula:

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to confirm the required of return,I divided the by the required rate of return as shown below:

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