Question

There are three seats on the board of directors of MMT, Inc., up for election. The firm has 175,000 shares of stock outstanding and uses cumulative voting. Each share is granted one vote per open seat. You currently own 10,000 shares that have a market value of $21 each. How much must you spend, if anything, to acquire sufficient shares to guarantee your election to the board

Answer 1

Answer:

$708,750

Explanation:

The computation of the amount spend is shown below:

But before that first determine the number of shared needed which is

= (Shares of stock × number of seats) ÷ (total number of seats + 1) + 1

= (175,000 shares × 1) ÷ (3 + 1) + 1

= 43,750 + 1

= 43,751 shares

Now the cost is

= (43,751 shares - 10,000 shares) × $21

= $708,750