Consider a firm that has dual-class shares with 250 million Class A shares (having 1 vote each) and 75 million nonlisted Class B shares having 10 votes each.The shares are otherwise identical.If one requires 51 percent of the votes to control the firm, what number of Class B shares must one control?

Question

Quizplus · Accepted Answer

The total number of votes in the firm is 250 million + (75 million x 10) = 1.025 billion votes. To control the firm, one must have 51% of the votes, which is equal to 0.51 x 1.025 billion = 522.75 million votes. Since each Class B share has 10 votes, one needs to control 522.75 million / 10 = 52.275 million Class B shares. Therefore, the answer is B) 51 million, since controlling this number of Class B shares would provide 51.075 million votes, which is slightly above the required 51% threshold.

Consider a Firm That Has Dual-Class Shares with 250 Million