Zenith Capital holds enough stock in Company X and Company Y to give it voting control of

Question:

Zenith Capital holds enough stock in Company X and Company Y to give it voting control of both firms. Consider the accompanying simplified balance sheets for these companies.

image text in transcribed

a. What percentage of the total assets controlled by Zenith Corporation does its common stock equity represent?

b. If another company, Z, owns 25% of the common stock of Zenith Corporation and, by virtue of this fact, has voting control, what percentage of the total assets controlled does the outside company’s equity represent?

c. How does a holding company effectively provide a great deal of control for a small pound investment?

d. Answer parts a and b in light of the following additional facts.

(1) Company X’s fixed assets consist of £60,000 of common stock in Company A. This level of ownership provides voting control.

(2) Company A’s total assets of £1,200,000 include £45,000 of common stock in Company B, which gives Company A voting control over Company B’s £150,000 of total assets.

(3) Company Y’s fixed assets consist of £180,000 of stock in both Company C and Company  D. In both cases, this level of ownership gives it voting control.
Companies C and D have total assets of £900,000 and £1,200,000, respectively.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Principles Of Managerial Finance

ISBN: 9781292400648

16th Global Edition

Authors: Chad Zutter, Scott Smart

Question Posted: