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Rust Pipe Co. was established in 1994. Four years later the company went public. At that...

Rust Pipe Co. was established in 1994. Four years later the company went public. At that time, Robert Rust, the original owner, decided to establish two classes of stock. The first represents Class A founders' stock and is entitled to eleven votes per share. The normally traded common stock, designated as Class B, is entitled to one vote per share. In late 2010, Mr. Stone, an investor, was considering purchasing shares in Rust Pipe Co. While he knew the existence of founders’ shares were not often present in other companies, he decided to buy the shares anyway because of a new technology Rust Pipe had developed to improve the flow of liquids through pipes.

Of the 2,150,000 total shares currently outstanding, the original founder's family owns 53,225 shares.


What is the percentage of the founder's family votes to Class B votes? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  

Solutions

Expert Solution

The company has two type of shares

1. class A- Founder stock Entitled 11 Votes per share

i.e. 1 Share=11 Votes

2. Class B-Common Stock 1 Vote per share

i.e 1 Share= 1 Vote

Total outstanding shares =2150000

Shares Held by Original founding family=Class A shares=53225

Class B Shares=Total Outstanding shares-Class A Shares

Class B Shares=2150000-53225

Total Class B Shares=2096775

1 Class B share=1 Vote

Total Class B Votes=2096775*1

Total Class B Votes=2096775

Similarly 1 Class A share=11 Votes

Total Class A Votes=Class A shares * 11

Total Class A Votes=53225*11

Total Class A Votes (Founder Family Votes)=585475

Percentage of Founders Family Votes (Class A Votes) to Class B Votes = (Total Class A Votes/Total Class B Votes)*100

Percentage of Founders Family Votes (Class A Votes) to Class B Votes =(585475/2096775)*100

Percentage of Founders Family Votes (Class A Votes) to Class B Votes =(0.279226431066)*100

Percentage of Founders Family Votes (Class A Votes) to Class B Votes =27.92%

jeff jeffy answered 2 years ago
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