Question

Rust Pipe Co. was established in 1994. Four years later the company went public. At that time, Robert Rust, the original owner, decided to establish two classes of stock. The first represents Class A founders' stock and is entitled to twelve votes per share. The normally traded common stock, designated as Class B, is entitled to one vote per share. In late 2010, Mr. Stone, an investor, was considering purchasing shares in Rust Pipe Co. While he knew the existence of founders’ shares were not often present in other companies, he decided to buy the shares anyway because of a new technology Rust Pipe had developed to improve the flow of liquids through pipes. Of the 1,900,000 total shares currently outstanding, the original founder's family owns 52,725 shares. What is the percentage of the founder's family votes to Class B votes? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Answer 1

34.25%

Step-by-step explanation:

Votes per share = 12

Shares owned = 52725

Now we are to calculate the total value of the total number of of votes

Total votes = votes per share * shares owned

= 12*52725

Total = 632700

Value of votes of class B

Total shares outstanding - founders family shares

= 1900000 - 52725

= 1847275

The question requires us to calculate percentage of the founder's family votes to Class B votes

632700/1847275

= 0.3425

= 34.25%