Question

You want a seat on the board of directors of Zeph, Inc. The company has 250,000 shares of stock outstanding and the stock sells for $51 per share. There are currently 5 seats up for election. If the company uses cumulative voting, how much will it cost you to guarantee that you will be elected to the board?

Answer 1

$2,550,000

Step-by-step explanation:

When cumulative voting is used, you are generally assigned 1 vote per each stock that you own. In this case, since 5 seats are up for election, you will need at least 20% of the total stocks outstanding to be 100% sure that you will be elected to the board of directors.

250,000 x 20% x $51 = $2,550,000