CORPORATE FINANCE - LL+CONNECT ACCESS
CORPORATE FINANCE - LL+CONNECT ACCESS
12th Edition
ISBN: 9781264054961
Author: Ross
Publisher: MCG
Question
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Chapter 1, Problem 6CQ
Summary Introduction

To critically think about: Whether the act of the management is in the interest of the shareholders.

Introduction:

The managers of the firm act in the interest of the shareholders based on the following two factors.

  • First factor: The goals of the management are aligned to the shareholders goals.
  • Second factor: The replacement of the managers for not pursuing stockholders’ goals is the second factor.

Situation:

Person X owns stock in a company. The present share price is $25. There is an announcement made by another company stating that it needs to purchase Person X’s company. It also says that it will pay $35 per share to obtain all the outstanding stocks. Person X’s management starts fighting for the hostile bid.

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