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Chapter 5: Q9BP-d. (page 567)

Midland Petroleum is holding a stockholders鈥� meeting next month. Ms. Ramsey is the president of the company and has the support of the existing board of directors. All 12 members of the board are up for reelection. Mr. Clark is a dissident stockholder. He controls proxies for 34,001 shares. Ms. Ramsey and her friends on the board control 44,001 shares. Other stockholders, whose loyalties are unknown, will be voting the remaining 24,998 shares. The company uses cumulative voting.

d. If nine directors were to be elected, and Ms. Ramsey and her friends had 60,001 shares and Mr. Clark had 40,001 shares plus half the uncommitted votes, how many directors could Mr. Clark elect?

Short Answer

Expert verified

The number of directors that Mr. Clark can elect is 4 if he can obtain half of the uncommitted votes.

Step by step solution

01

Information provided in the question

Number of directors = 12

Proxies controlled by Mr. Clark = 34,001 shares

Shares held by uncommitted stockholders = 24,998

02

Calculation of the number of directors that can be elected by Mr. Clark if he obtains half of the uncommitted votes

Mr. Clark can elect 4 directors if can obtain half of the uncommitted votes.

Number of directors that can be elected=\begingatheredShares owned-1\hfill脳Total number of directors to be elected+1\hfill\endgatheredTotal number of shares outstanding=40,001+12,499-1脳9+140,001+60,001+24,998=524,990125,000=4.2

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Most popular questions from this chapter

Midland Corporation has a net income of \(19 million and 4 million shares outstanding. Its common stock is currently selling for \)48 per share. Midland plans to sell common stock to set up a major new production facility with a net cost of \(21,120,000. The production facility will not produce a profit for one year, and then it is expected to earn a 13 percent return on the investment. Stanley Morgan and Co., an investment banking firm, plans to sell the issue to the public for \)44 per share with a spread of 4 percent.

a. How many shares of stock must be sold to net $21,120,000? (Note: No out-of-pocket costs must be considered in this problem.)

Solar Energy Corp. has $4million in earnings with 4 million shares outstanding. Investment bankers think the stock can justify P/E ratio of 21. Assume the underwriting spread is 5 percent. What should the price to the public be?

The Wrigley Corporation needs to raise \(44 million. The investment banking firm of Tinkers, Evers & Chance will handle the transaction.

  1. If stock is utilized, 2,300,000 shares will be sold to the public at \)20.50 per share. The corporation will receive a net price of \(19 per share. What is the percentage underwriting spread per share?
  2. If bonds are utilized, slightly over 43,700 bonds will be sold to the public at \)1,009 per bond. The corporation will receive a net price of $994 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.)
  3. Which alternative has the larger percentage of spread? Is this the normal relationship between the two types of issues?

What are the disadvantages to being public?

Discuss the reason for the differences between underwriting spreads for stocks and bonds.

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