Chapter 17: Krager Foods Corp. has 650,000 shares outstanding. General Grocery,
ID: 2742483 • Letter: C
Question
Chapter 17: Krager Foods Corp. has 650,000 shares outstanding. General Grocery, one of its subsidiaries, is disgusted with current management practices and is trying to get some of its own people elected to the board of directors. There are twelve directors, and General Grocery owns 60,000 shares.
a) Under cumulative voting, how many directors can General Grocery elect?
b) How many shares will General Grocery have to acquire in order to elect seven directors?
Chapter 17: Fritz Corporation has 800,000 shares of preferred stock and 1,800,000 shares of common stock. The cumulative preferred stock has a stated dividend of id=mce_marker.75 per share. Under normal conditions, Kreisler pays out preferred dividends and 30% of remaining earnings to common stockholders, however, because of a severe recession, Fritz retained all earnings last year. This year, Fritz earned net income of $5 million.
Calculate the dividend per share to be received by the common stockholders this year.
Explanation / Answer
(Total number of shares outstanding)
Number of directors = (60,000 – 1) (12 + 1) = 1 director
650,000
B). Shares need for election of 7 directors = (7) (650,000) + 1 = 350,001
12+1
350,001 shares will need to elect 7 directors under cumulative voting method.
Shares required – Shares owned = Shares to be acquired
350,001 – 60,000 = 290,001 shares
Preferred dividends $ 1,200,000
( 2 years x $ 0.75 x 800,000 shares) ---------------
$ 3,800,000
X 30%
---------------
To be paid out in dividends $ 1,140,000
Common shares outstanding 1,800,000
Dividend per share = Total paid out dividends / shares outstanding
= $ 1,140,000 / 1,800,000 = $ 0.633 per share
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