Stock Market and Payout

Topics: Stock market, Stock, Finance Pages: 2 (664 words) Published: November 24, 2013
Week 11 (11/26) : Gainesboro Mechine Tool (27)

In mid-September 2005, Ashley Swenson, the chief financial officer (CFO) of a large computer-aided design and computer-aided manufacturing (CAD/CAM) equipment manufacturer needed to decide whether to pay out dividends to the firm’s shareholders, or to repurchase stock. If Swenson chose to pay out dividends, she would have to also decide upon the magnitude of the payout. A subsidiary question is whether the firm should embark on a campaign of corporate-image advertising, and change its corporate name to reflect its new outlook.

Suggested Questions

1. In theory, to fund an increased dividend payout or a stock buyback, a firm might invest less, borrow more, or issue more stock. Which of those three elements is Gainesboro’s management willing to vary, and which elements remain fixed as a matter of the company’s policy? 2. What happens to Gainesboro’s financing need and unused debt capacity if: a. no dividends are paid?

如果不把錢拿去付股利的話,那些錢可以拿去做投資,如CAD/CAM等需要大量的資金投資的先進技術,但由於不發放股利,這樣會影響投資人投資公司的意願,進而影響公司未來籌資及財務表現等等。 如果沒有付股利的話,會讓投資人覺得你是否focus在比較hi-tech的未來目標,跟同業比起來這種類型的公司比較少再發放股利,所以這樣子他們會比較有更多的capital,所以他們growth的機會比較高,會讓有些投機客擔心會不會很久之後才會有dividends

b. a 20% payout is pursued?
雖然採取這樣折衷的方法對兩邊都比較沒有負擔,但跟同業比起來,20%的股利較低,如此一來,相較於同業,可以更彈性運用手上現金,做更理想的投資,研發新科技。但會讓投資人覺得比較擔心,是否公司的狀況較差,才會比起同業而言,發放的股利較低。 c. a 40% payout is pursued?
公司內部對公司的未來比較有自信,但是40%有點高,會稀釋掉手頭上的現金,對未來的投資會比較受限制;且對於40%股利來說,可能無法支撐預期未來會有15%的成長目標。 d. a residual payout policy is pursued?
因為高科技技術需要將資金投入於研發中,其必須確保擁有足夠的現金,因此這種類型的公司通常比較不會發放很高的股利。公司先把錢拿去做投資,剩下的錢再拿去發股利,這樣對公司的投資方面比較不會有太大的負擔;

Note that case Exhibit 8 presents an estimate of the amount of borrowing needed. Assume that maximum debt capacity is, as a matter of policy, 40% of the book value of equity. 3. How might Gainesboro’s various providers of capital, such as its stockholders and creditors, react if Gainesboro declares a dividend in 2005? What are the arguments for and against the zero payout, 40%...
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