Question

Required information [the following information applies to the questions displayed below.} nicole has been financing nicole's getaway spa (ngs) using equity financing. currently ngs has authorized 100,000 no-par preferred shares and 200,000 $2 par common shares. outstanding shares include 42,000 preferred shares and 32,000 common shares. recently the following transactions have taken place.

a. ngs issues 600 preferred shares for $12 a share.
b. ngs repurchases 600 common shares for $11 a share.
c. on november 12, the board of directors declares a $0.40 cash dividend on each outstanding preferred share.
d. the dividend is paid december 20.

Answer 1

A combination of investors holding over 50,000 shares is required to change the company's top management. Investors 1 and 2 together hold 38,000 shares, which is not a majority. Therefore, they cannot always ensure to get their way, and at least three investors are needed to have the majority.

Step-by-step explanation:

To determine the minimum number of investors required to change the company's top management, one must calculate the majority of the 100,000 shares. A simple majority requires more than 50,000 shares. Here's the breakdown:

• Investor 1: 20,000 shares
• Investor 2: 18,000 shares
• Investor 3: 15,000 shares
• Investor 4: 10,000 shares
• Investor 5: 7,000 shares
• Investors 6-11 (six investors): 5,000 shares each, totaling 30,000 shares

If Investors 1 and 2 vote together, they control 38,000 shares. This is not a majority, so they cannot be certain of always getting their way in how the company is run. To change top management, it requires a combination of investors holding more than 50,000 shares. Considering the distribution of shares above, this can be achieved with a minimum of three investors, assuming those three are Investors 1, 2, and 3, who jointly hold 53,000 shares.