Chapter 5: Q9BP-d. (page 567)

Midland Petroleum is holding a stockholders’ 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

Information provided in the question

Number of directors = 12

Proxies controlled by Mr. Clark = 34,001 shares

Shares held by uncommitted stockholders = 24,998

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.

$Number of directors that can be elected = \frac{\ begingathered (Shares owned - 1) \ hfill \times (Total number of directors to be elected + 1) \ hfill \ endgathered}{Total number of shares outstanding} = \frac{([40, 001 + 12, 499] - 1) \times (9 + 1)}{(40, 001 + 60, 001 + 24, 998)} = \frac{524, 990}{125, 000} = 4.2$

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Bailey corporation
Income statement
For the year 20X1
Sales (all on credit)	\(42,680,000
Cost of goods sold	\)32,240,000
Gross profit	\(10,440,000
Selling and administrative expenses	\)4,558,000
Operating profit	\(5,882,000
Interest expense	\)600,000
Net income before taxes	\(5,282,000
Taxes	\)2,120,000
Net income	\(3,162,000

Bailey corporation
Balance sheet
As of December 31, 20X1
Assets
Current assets:
Cash	\)250,000
Marketable securities	\(130,000
Accounts receivables	\)6,000,000
Inventory	\(8,300,000
Total current assets	\)14,680,000
Net plant and equipment	\(13,970,000
Total assets	\)28,650,000
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	\(3,800,000
Notes payable	\)3,550,000
Total current liabilities	\(7,350,000
Long-term liabilities	\)5,620,000
Total liabilities	\(12,970,000
Stockholder’s equity:
Common stock (1,800,000 shares at \)1 par)	\(1,800,000
Capital in excess of par	\)6,300,000
Retained earnings	\(7,580,000
Total stockholder’s equity	\)15,680,000
Total liabilities and stockholder’s equity	$28,650,000

Short Answer

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

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