RayCorp Offers to Buy Out MegaCorp by Paying $69 Per

question 42

Multiple Choice

RayCorp offers to buy out MegaCorp by paying $69 per share.LandCo,who also wants to buy MegaCorp,offers to pay $75 per share.When the bidding process is finally over,RayCorp has offered $85 per share and LandCo has offered to pay $90 per share.MegaCorp agrees to sell to RayCorp on grounds that,all things considered,the takeover by RayCorp would be better for the business.LandCo claims that MegaCorp should have sold the company to it since it was the highest bidder.Is LandCo correct?

• A)Yes.This is a breach of duty.MegaCorp must sell the company to the highest bidder;it cannot give preferential treatment to a lower bidder.
• B)No.This is covered by the Williams Act.
• C)No.The directors have broad discretion in deciding to whom to sell the company.
• D)No.MegaCorp is acting in good faith by considering all things,not just the offering price of the shares.

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Definitions:

Nth Partial Sum

The sum of the first n terms of a sequence, used to determine the cumulative value of a series up to a specified number of terms.

Geometric Sequence

An ordered list of numbers where, starting with the second term, each entry is the result of multiplying the one before it by a consistent, non-zero factor termed the common ratio.

Common Ratio

The constant factor between consecutive terms of a geometric sequence.

Fifteen Minute Intervals

Segments of time each lasting fifteen minutes, often used in scheduling or time management.