After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you.

If the company has 550,000 shares outstanding and the stock currently sells for $33, how much will it cost you to buy a seat if the company uses straight voting?

Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.

Assume that the company uses cumulative voting and there are three seats in the current election; how much will it cost you to buy a seat now?

Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.

### 1. **Cost to Buy a Seat with Straight Voting:**

In straight voting, each shareholder has as many votes as they have shares. To win a seat, you need more than 50% of the votes. So, you would need to buy enough shares to control the majority.

- The company has **550,000** shares outstanding, so to guarantee winning a seat, you need **more than half**, or:

\[
\text{Shares needed} = \frac{550,000}{2} + 1 = 275,000 + 1 = 275,001 \text{ shares}
\]

- The stock price is **$33** per share. Thus, the total cost to buy the required shares is:

\[
\text{Cost} = 275,001 \times 33 = 9,075,033 \text{ dollars}
\]

### 2. **Cost to Buy a Seat with Cumulative Voting:**

In cumulative voting, the total votes you have are equal to the number of shares you hold multiplied by the number of seats up for election. You can allocate all your votes to a single candidate (yourself).

There are three seats up for election, so to guarantee winning one seat, you need to control more than one-fourth of the total votes. This is because:

\[
\text{Fraction of votes needed to win one seat} = \frac{1}{\text{Number of seats} + 1} = \frac{1}{3 + 1} = \frac{1}{4}
\]

Thus, you need **more than 25%** of the total votes to ensure victory. The total votes available in the election are:

\[
\text{Total votes} = \text{Shares outstanding} \times \text{Number of seats} = 550,000 \times 3 = 1,650,000
\]

To win a seat, you need more than one-fourth of these votes:

\[
\text{Votes needed} = \frac{1,650,000}{4} + 1 = 412,500 + 1 = 412,501
\]

Now, to determine the number of shares you need:

\[
\text{Shares needed} = \frac{412,501}{3} = 137,500.33
\]

Since you can't purchase a fraction of a share, you need to round up to the next whole number: **137,501 shares**.

- The cost to buy these shares is:

\[
\text{Cost} = 137,501 \times 33 = 4,537,533 \text{ dollars}
\]

### Summary of Results:
- **Cost with straight voting**: **$9,075,033**
- **Cost with cumulative voting**: **$4,537,533**

---

Would you like further details on the calculation process, or do you have any specific questions?

Here are five related questions to expand your understanding:
1. How does straight voting differ from cumulative voting in terms of shareholder influence?
2. How would the cost change if the share price increased or decreased?
3. What is the impact of the number of seats up for election on the cost in cumulative voting?
4. How would proxy voting affect your ability to win a seat?
5. What are the pros and cons of cumulative voting from a minority shareholder's perspective?

**Tip**: Cumulative voting allows minority shareholders to pool their votes, increasing their chances of electing at least one representative.

After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you. If the company has 550,000 shares outstanding and the stock currently sells for $33, how much will it cost you to buy a seat if the company uses straight voting?
Assume that the company uses cumulative voting and there are three seats in the current election; how much will it cost you to buy a seat now?

Learn how to calculate the cost of buying a board seat at Schenkel Enterprises. Understand the difference between straight voting and cumulative voting systems, and how many shares are needed to secure a seat in each case. In this example, with 550,000 shares outstanding and a share price of $33, the costs for both voting methods are calculated step-by-step.

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