The Payment Of Dividends And The Issue Of Shares

The Payment Of Dividends And The Issue Of Shares
The payment of dividends and the issue of shares in return for capital investment are important aspects of
company law. As such, there are certain requirements that must be met in order for both shares and dividends
to be lawfully issued. These requirements are located within the company's articles and statute. The
Company's articles "operate as contract between the company and its members" and outline the requirements
that the directors must follow in order for a transaction to be lawful.
ABC wish to issue new shares and a pay a dividend using the newly appointed share capital. There is no
detail in relation to when ABC were incorporated other than that it was under the Companies Act 2006
("CA"). There are many versions of the standard ... Show more content on Helpwriting.net ...
This is supported by statute which allows directors to issue share capital provided this is sanctioned by the
articles. It is possible for the articles of the company to permit different classes of share to be offered and thus
enable preferential shares to be offered to Mrs Donald and the Model Articles clearly does this within article
22. There are however, certain caveats in respect of the rights of the existing members which can restrict this
provision. The CA gives existing shareholders a right of pre–emption as a means of preventing their voting
power from being diluted by the allotment of new shares if the issue is of ordinary shares.
Section 561 determines that existing members must be offered "on the same or more favourable terms a
proportion" of the proposed issue equal to the proportion of shares held by the member. The offer must be
made to the existing member in writing and must allow at least 14 days for the offer to be accepted or
declined. Contravention of this requirement could render the officer(s) involved and the company jointly and
severally liable to the member for any loss suffered or expense incurred by their failure to meet this
requirement. However section 563 CA does not result in an invalidation of the allotment in the event that it
was done infringing section 561 or 662 CA.
Whilst it is possible
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TN25 Gainesboro Machine Tools Corporati
Gainesboro Machine Tools Corporation
Teaching Note
Synopsis and Objectives
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. The case serves as an omnibus review of the many practical aspects of the dividend and share
buyback decisions, including (1) ... Show more content on Helpwriting.net ...
(Or alternatively, Why pay any dividends?) How will Gainesboro's various providers of capital, such as its
stockholders and bankers, react to a declaration of no dividend? What about the announcement of a 40%
payout? How would they react to a residual payout?
The instructor needs to elicit from the students the notions that the dividend–payout announcement may affect
stock price and that at least some stockholders prefer dividends. Students should also mention the signaling
and clientele considerations.
4. What risks does the firm face?
Discussion following this question should address the nature of the industry, the strategy of the firm, and the
firm's performance. This discussion will lay the groundwork for the review of strategic considerations that
bears on the dividend decision.
5. What is the nature of the share repurchase decision that Swenson must make? How would this affect the
dividend decision?
The discussion here must present the repercussions of a share repurchase decision on the share price, as well
as on the dividend question. Signaling and clientele considerations must also be considered.
6. Does the stock market appear to reward high–dividend payout? What about low–dividend payout? Does it
matter what type of investor owns the shares? What is the impact on share price of dividend policy?
The data can be interpreted to support either view. The point is to show that simple extrapolations from stock
market data are untrustworthy,

Ford Company Analysis
Case Study: Ford Motor Company's VEP
Question 1
Go ahead with the Value Enhancement Plan
The feature of having both cash and new share options makes the VEP have its strengths and makes an
excellence choice for Ford Motor Company. The cash option solves the problem of Ford having massive
amounts of extra cash. Since Ford has no profitable activities for the extensive amounts of cash, returning the
excess cash to shareholders allows them to make profitable investments. Different from a cash dividend, the
returned cash will be taxed as capital gain and therefore achieves tax efficiency for the shareholders. When
looking at the company's point of view, they are able to lower the dividend payment because there will be an
increase ... Show more content on Helpwriting.net ...
It would be inefficient for an institutional investor to elect to only the stock option. The reason for this is
because the VEP favors the Ford family members and dilutes the value of an investors voting power. It would
be hard to compete with the Ford family even if the investors were to put all of their $20 cash into buying
new common shares. A combination of both cash and stock would be a good option for them as they would
have an opportunity to get part of their investment out of Ford as well as invest in opportunities somewhere
else. In a sense, they would not be putting all their eggs in one basket. They would have a good return on
there initial investment if they take part of the $20 as cash.
Outside Shareholder
If I were a regular outside shareholder I would choose the cash option because their main concern is to make
a profit while they care less about voting power. Going with the cash option is a good idea because if I were a
shareholder, I would think that Ford has few growth opportunities and cannot find profitable plans for the
future. This would give the shareholders the freedom to do as they desire with the cash and make their own
independent investments. Although the new price of shares would decrease, the shareholders would not bear
the loss because the cash they receive offsets the reduced price. Note that any final decision as an outside
shareholder should calculate in the tax

The Inspirational and Positive Responses of Offer Buyback
Offer buyback is advanced by numerous investigates placing a mixture of inspiration theory and
confirmations supporting offer buyback. Studies have recorded the inspirations and positive responses from
capital markets of U.s.a, Europe,japan, Taiwan, and so forth.
Dann (1981) and Masulis (1980) in their investigations of delicate offers have proposed and tried individual
duty theory to illustrate the increment in firm esteem going to stock repurchases. Their study uncovered that
the company's moguls who were in a high duty section, favored repurchases as a method for circulation since
the cohorted capital additions are liable to lower charges (especially if deferred).the publication return
reflected an increment in the after–assessment worth of the firm connected with the inferred change in
appropriation approach.
Vermaelen (1981) inspected 131 purchase back delicate offers and credited the positive offer market response
to data indicating impact whereby the administration embraces purchase once more to persuade the
shareholders that the shares of the organization are undervalued. Grullon and Ikenberry et al (1995 and 2000)
have underpinned this contention. Wang & Johnson (2005) likewise embraced the thought that impart
buyback is an administration device to pass on data to the business around a guaranteeing organization future.
Jensen (1986) expressed that organizations repurchase stocks to disseminate overabundance money stream
and there is a positive

Case Study : Gainesboro Machine Tools Corporation
Anyikor Acuil
FINC 6602
Case Study Analysis
GAINESBORO MACHINE TOOLS CORPORATION
Overview
In mid–September 2005, Ashley Swenson, the CFO of large CAD/CAM equipment producer must choose
whether to pay out profits to the firm¡¦s investors or repurchase stock. On the off chance that Swenson pays
out profits, she should likewise settle on the extent of the payout.
Gainesboro had possessed the capacity to keep up its position as an industry pioneer in the CAD/CAM
showcase. The case shows how expanded market passage and rivalry can make a difficult for organizations
and put descending weight on profit. The outcome is that if an organization like Gainesboro is to have a
battling chance they should be original and concocted items that test ... Show more content on
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Moreover, the managers have forced 40%; this implies the requirement to value proportion is never to surpass
this rate. In 2004 when the organization needed to acquire finances remotely keeping in mind the end goal to
pay a profit the obligation level rose to 22% and the case shows that it was an issue talked about frequently in
meetings is as yet a matter of exchange among the organization 's more established officials.
In light of the organization 's affect ability to obligation settled component, I consider it a far–fetched
resource of assets to fund the 2005 profit they guaranteed. Despite the fact that a 2005 profit guaranteed, but
it doesn 't imply that a stock buyback is not feasible or off the table. However, every alternative requires a
new source of assets.
As indicated by the article, it is an argument about stock repurchases, and monetary financial experts express
those corporate managers utilize repurchases to signal in their good faith about the company 's promises for
the market. In general, the accord by all accounts that supervisors regularly say that they are repurchasing
stock keeping in mind the end goal to expand profit per share. However, the creators recommend that this
suspicion is defective and that contracting the extent of a firm just includes esteem if the company is
neglecting to win its cost of capital on its peripheral ventures. In light of this article tragically that the case
does not

Keurig Green Mountain And Its Operations
After reviewing the financial and performance information related to Keurig Green Mountain and its
operations, I would recommend holding the Keurig Green Mountain stock. Keurig has a high degree of
leverage and has the ability to take on more debt to finance its expansion of operations. As Keurig Green
Mountain navigates managing strong sales in current markets and expanding into untapped markets, it will
also have to manage criticism about sustainability and face legal consequences stemming from product
recalls. Balancing the strong growth potential with challenging strategic issues will help determine Keurig's
unpredictable stock price.
Founded in 1981 in Waitsfield, Vermont, Green Mountain Coffee Roasters invested in Keurig, ... Show more
content on Helpwriting.net ...
The lawsuits against Keurig are detrimental for its image and also represent the possibility of lost earnings
from more recalls and future settlements.
In February 2015, Keurig announced a contractual stock repurchase plan. Keurig Green Mountain reached an
agreement to repurchase over 5 million shares of Keurig's common stock from Luigi Lavazza at a price of
$119.18 per share. (The purchase price represents a 3.0% discount off the closing price of Keurig common
stock on February 20, 2015). This repurchase will be financed through Keurig's cash reserves and existing
credit. Stock repurchase programs are often used by companies as an efficient use of excess cash. Stock
buyback programs are often regarded as signal that shares are undervalued and are expected to rise in the
future.
In March of 2015, Keurig acquired DS Services. Through the acquisition of DS Services, Keurig will now be
able to offer a new brand of beverages – Javarama. Keurig's deal with DS Services will allow Keurig to
manufacture Javarama and other gourmet roasts through the exclusive K–Cup platform. This acquisition
shows Keurig's commitment to providing its customers with new, desirable products. Keurig Green Mountain
is a leader in the industry it operates in.
Keurig Green Mountain has experienced steady growth in

California Pizza Kitchen
California Pizza Kitchen
Chris Schroeder
FI 602: Financial Strategy and Valuation Fang Chen September 21, 2012
Introduction
In July of 2007, California Pizza Kitchen (CPK), a casual dining pizzeria started in California by co–owners
Rick Rosenfield and Larry Flax, was faced with the decision to invest in a stock repurchase program. Led by
Chief Financial Officer Susan Collyns, the financial team of CPK was reviewing the preliminary results for
the second quarter to determine if the stock repurchase program would provide a significant financial
leverage for the company. The goal was to determine if the company can maintain the necessary financial
stability to meet the expected growth trajectory for 2008 while utilizing debt ... Show more content on
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Not only would this benefit the company, but would also benefit the stakeholders who just received the
additional 50% stock dividend that CPK issued.
Financial Leverage on WACC
When analyzing which debt financing option CPK should choose, the weight average cost of capital (WACC)
will provide an approximation on how much CPK must earn in order to satisfy the amount financed. The
values of WACC for the actual, 10%, 20%, and 30% options can be found in Appendix A. It appears that the
higher the financial leverage, the lower the WACC will be. Take for instance if CPK chooses a 30% debt to
capital situation, the ROE will be 11.1 % with a 9.2% WACC. In contrast, at the actual value, the ROE is 9%
with the WACC being 9.5% and could pose badly for CPK. As long as CPK is comfortable with the high risk
of a 30% debt to capital ratio, then it would be the most beneficial in terms of adding economic value to the
company, and for the shareholders, while providing a high financial leverage.
Financial Leverage and Cost of Equity
The effect of financial leverage on the cost of equity is prevalent in the Modigliani–Miller capital structure
theory. Since the financial leverage increases the cost of equity, it can be considered one of the disadvantages
of borrowing. As shown in Appendix A, the cost of equity, at each debt to capital ratio, increases by 0.1% as
the financial leverage increases by 10%. With a higher

Essay on Eastboro Analysis
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 these three elements is Eastboro management willing to vary, and which
elements remain fixed as a matter of policy?
Management is willing to vary their investment (investing less) as well as issue more stock. This is not
against their policy. But the management would not be willing to borrow more as their borrowing policy is
limited to 40% debt to equity ratio.
2. What happens to Eastboro's financing need and unused debt capacity if
,
a. No dividends are paid?
If no dividend are paid, the company does not need financing required for the dividends. Hence the
company's financing needs ... Show more content on Helpwriting.net ...
Based on the financing needs, as above dividends would be additional stretch on company finances
3. How might Eastboro's various providers of capital, such as stockholders and creditors, react if Eastboro
declares a dividend in 2001?
If Eastboro declares a dividend in 2001, it will have to take debt to raise the money required for the dividend.
The creditors will not react positively with this decision because the money is not being used in the increasing
the value of the company. On the other hand, the stockholders will react positively as the dividend payout
reflects confidence of managers in the future earnings of the company and also gives the stock holders
flexibility to invest their dividend earnings in other companies .
4. What are the arguments for and against the zero payout, 40 percent payout, and residual payout policies?
What should Jennifer Campbell recommend to the board of directors with regard to a long–run dividend
payout policy for Eastboro Machine Tools Corporation?
Stock prices increase on average when firms announce
– Increases in dividends (around 2%)
– Dividend initiations (around 3%)
Stock prices decrease on average when firms announce
– Decreases in dividends (around –2.5%)
– Dividend omissions (around –9.5%)
What the market learns from dividend changes may depend on the firm's particular circumstances:
1. The firm wishes to attract attention: 2. Div increase signals mgmt confidence 3. The

Carborundum Case Solution
Part A (i) Issue: Are members liable for Carborundum's debts when winding up? Rule & Application: Since
Carborundum is limited by shares and member's liability is amount unpaid on share held, Alan, Ben and
Colin who fully paid up their shares owed no liability, while others had to pay unpaid $0.9/shares. As stated
in Salomon , debt is therefore the company's responsibility, and the 'corporate veil' protects shareholders in
their personal capacity from any liability. Conclusion: Alan, Ben and Colin owed no liability, Eric Sanders
owed $3600 (4000*0.9), Donald Thump owed $10800(12000*0.9), and Inventions owed $19800 (22000*0.9)
(ii) Issue: How can company remove Hilary from her position? Rule & Application: Firstly, Carborundum
can ... Show more content on Helpwriting.net ...
(iv) Issue: Can other directors remove Clause 5(further requirements) and then remove Hilary as chief
engineer? Rule & Application: GM can remove Clause 5. Clause 5 can only be removed when the Clause 5
itself is applied there is 80% approval at a GM (s136 (4)). After removal of Clause 5, Carborundum can fire
Hilary. If there is a separate employment contract between Hilary and Carborundum, Carborundum would
breach the contract and pay for damages. Conclusion: Shareholders may vote to remove clause 5 considering
5 out of 6 shareholders agree the removal. Part B (i) Issue: Is it possible not to pass deletion of Clause 3 in
GM by Inventions? Rule & Application: In order to remove Clause 3, a special resolution must be passed.
(s136 (2)). Therefore, on the GM, it only requires one of Alan, Ben, Colin and Eric to vote against Inventions
in order not for deletion of Clause 3 to happen. Besides, Donald's concern is unnecessary because according
to s 125, the statement of company's objects is optional and business contrary to any objects in the company's
constitution carried out by the company is not invalid irrespective of whether object clause exists or not.
Conclusion: Donald only needs to make sure one of Alan, Ben, Colin and Eric votes against Inventions. (ii)
Issue: Is it possible not to pass both change of name of Carborundum and change

Board of Directors
THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]
TITLE III
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
Sec. 23. The board of directors or trustees.
Sec. 24. Election of directors or trustees. – At all elections of directors or trustees, there must be present,
either in person or by representative authorized to act by written proxy, the owners of a majority of the
outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote. The
election must be by ballot if requested by any voting stockholder or member. In stock corporations, every
stockholder entitled to vote shall have the right to vote in person or by proxy the number of shares of stock
standing, at the time fixed in the ... Show more content on Helpwriting.net ...
Notice of the time and place of such meeting, as well as of the intention to propose such removal, must be
given by publication or by written notice prescribed in this Code. Removal may be with or without cause:
Provided, that removal without cause may not be used to deprive minority stockholders or members of the
right of representation to which they may be entitled under Section 24 of this Code.
Sec. 29. Vacancies in the office of director or trustee. – Any vacancy occurring in the board of directors or
trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the
vote of at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said
vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A director
or trustee so elected to fill a vacancy shall be elected only or the unexpired term of his predecessor in office.
A directorship or trusteeship to be filled by reason of an increase in the number of directors or trustees shall
be filled only by an election at a regular or at a special meeting of stockholders or members duly called for
the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the notice
of the meeting.
Sec. 30. Compensation of directors. – In

Share Repurchases and the Protection of
Share repurchases and the protection of shareholders* KATHLEEN VAN DER LINDE**
1 Introduction
From a creditor's perspective there is not much difference between the payment of a dividend in respect of a
share and a payment for the acquisition or repurchase of that share. However, from the point of view of the
shareholder a dividend is a return on capital while a repurchase is a return of capital to the vendor
shareholder. Share repurchases change the structure of the company's share capital and consequently also the
allocation of rights among shareholders.1 A repurchase combines a distribution to the selling shareholder with
an increase in the relative stakes of the non–selling shareholders.2 Alternatively, a repurchase has also ...
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They are coerced into either accepting the offer and giving up a part of their interest in the company, or
rejecting it and facing an increase in the relative size of their shareholding.7 If the company has more than
one class of shareholders a proportionate repurchase in a specific class of shareholders can still result in
unfair treatment among different classes. Even in a company with a single class of shares, a proportionate
offer may have a discriminatory effect if the intention is that particular shareholders will not accept the offer.8
For example, in a going private transaction a company's management or controllers could use a share
repurchase as a way of increasing their own shareholding to a level where they are able to freeze out the
remaining shareholders by compulsorily acquiring their shares.9 Similarly, in an empowerment transaction
the idea may be to repurchase shares from shareholders other than black investors so that the resultant stake
of the black investors is increased.10
Shareholder protection can be achieved in different ways. Some jurisdictions prescribe procedural
requirements for repurchases while others rely primarily on substantive principles of fairness. Takeover
regulation often addresses the use of repurchases as takeover mechanisms or as defensive strategies. I make
some reference to shareholder protection in the context of takeovers,

Autozone
AutoZone
Case Study Analysis
Executive Summary:
A case brief on AutoZone,Inc is being presented in this article. The paper briefly discusses the history and
progress strategy of the company so far. The main idea of the paper is the dilemma faced by a portfolio
manager– Mark Johnson– and the wise decision he could make in order to safeguard his client's portfolio.
The paper examines the current position of AutoZone in the market and its growth potential which would
help Johnson in making his decision.
At the closure of the paper, recommendations are being presented not only to the portfolio manager but also
to the AutoZone. Interestingly, how much of an impact can an interference of a corporate raider have on the
growth of a company ... Show more content on Helpwriting.net ...
In the short–run share repurchases might look good in order to increase the share price in the market and
increasing the Earnings Per Share of the stock. Even though the act of share repurchases might be an elusive
move, no doubt that it is a sophisticated move as well. Most of the time management is well aware of its
decisions and makes judgments in the best interest of the shareholders. But, AutoZone was pushing its luck
by accumulating debt and somehow seemed like the management wasn't concerned about the credit rating of
the company.
Another alternative would be to use the cash to increase number of stores or expansion of its business in
Brazil. There is always a first mover advantage that AutoZone could capture in the Brazil market. AutoZone
had already captured the market in Mexico, Canada and Puerto Rico.Yet again, autoparts industry seems to
have slowed down its number of store in the last year but the distance travelled by light trucks has remained
the same while the average age of these vehicles has increased (Appendix – Figure 4 & 5). This means
that these vehicles require maintenance in the long run. Also, AutoZone could be the first to capture new
markets.
Conventionally, AutoZone could also utilize its cash flow in acquisition transaction. Although, acquiring a
budding or established counterpart might increase the cash flow of the firm, additional legal formalities

A Modern Waste Water Containment Facility
As the chief operating officer of Brantford Manufacturing Co, I have enclosed an appropriate case analysis to
effectively resolve the issue with the pollutants disrupting business activity. Two distinct solutions are
provided along with a final recommendation to the board of directors in hopes of satisfying both parties
beyond expectations.
To begin, a corporation is run for the interest of shareholders alone. That is why solution Alpha proposes that
both corporations should operate for the interest of long–term share performance. Past results reveal that
BMC is highly successful through its doubling of share value in the past 5 years through its main revenue
source, the Brantford operation. Thus, in order to remain at its current state, it is crucial that the Brantford
factory remains through the construction of a modern waste water containment facility. The benefits
associated with this solution are that it allows the business to operate in the foreseeable future, potentially
generated 5% dividends for shareholders as it once did in the past. By providing consistent quality products
produced by the Canadian workforce, keeping our promise with the Ontario government. It also resolves a
flooding problem within Brantford, preventing future law suits directed towards BMC from the Brantford
community. Brand image will also be maintained if not improved as our activities will be marketed as a
corporate social initiative as it creates a positive environmental impact for the local

Strategic Initiative Paper.
Running head: MICROSOFT STRATEGIC INTIATIVE 1 MICROSOFT STRATEGIC INTIATIVE �
PAGE * MERGEFORMAT �7� Microsoft Corporation – Strategic Initiative Paper Ruby Lee, Edward
Abaunza, Brian Hammock University of Phoenix Finance for Business FIN 370 Grace Reyes August 29,
2010 � � Microsoft Corporation – Strategic Initiative Paper Over the past few years the economy in the
United States has taken a downturn. It has been so bad, that some businesses were not able to survive.
However, Microsoft Corporation (Microsoft) was not one of those companies. The fiscal strength of
Microsoft played a large part in providing the company with the ability and resources to survive the difficult
financial markets (Microsoft Corporation, 2009). As a ... Show more content on Helpwriting.net ...
It is the goal to maximize the wealth of shareholders and Microsoft was able to use their excess cash to
repurchase stock that led to a large return. The repurchase of stock has taken place over the last few years and
has helped to increase the shareholders return. Another impact of costs would be operating expenses. The cost
of revenue has been rising over the last few years. (Microsoft Corporation, 2009) When companies set out to
repurchase shares of its own stock, they are generally thinking that doing so will increase earnings per share
rather than having a direct effect on its sales. In other words, there is no direct relationship on a company's
sales if they decide to repurchase their stock. However, there are potential tax savings to shareholders.
Companies can do a few things when providing value to their shareholders, they can either pay a dividend,
which is a certain amount per share, per quarter, that puts money back into the investors original investment,
or they can decide to repurchase their own stock, boosting earnings per share and the potential for their stock
to grow exponentially because the number of shares outstanding is reduced. In the case of Microsoft, they
have announced the potential to repurchase up to $40 billion of their own stock by September 30, 2013 if they
see the need to do so. They have also decided to stick with their dividend program boosting it to .13 per

Formal Meeting Guide For Two New Zealand Cultures Essay
Formal meeting guide for two New Zealand cultures
Submitted by: Submitted to:
Mandeep Singh Anika VATS
Student Id –14095424B
Tables of content
1. PART1 MAORI CULTURE .................................................................3
a. INTRODUCTION ABOUT MAORI HUI CULTURE, MARAE.........3
b. About the HUI introduction..........................................................3
c. AGENDA........................................................................................3
d. REGULATION................................................................................3
e. PROCESS FOLLOW AT HUI........................................................4
f. RECORD REQUIRED FOR HUI MEETING...................................5
2. PART 2 NZ CULTURE REGISTERED COMPANY'S ACT 1993..5
a. INTRODUCTION.............................................................................5
b. REGULATIONS AND STATUTORY REQUIRMENTS ASSOSIATED WITH SUCH
MEETING..........................................5
c. TYPICAL AGENDA OF SHAREHOLDER MEETING....................6 d. THE PROCESS REQUIRED
FOR SUCH A MEETING..................6 e. RECORD REQUIRED FOR SUCH A MEETING...........................7
3. GLOSSARY OF THE MAORI TERMS.................................................8
4.

Essay on FPL Group
DIVIDEND POLICY AT FPL GROUP INC Q.1 DIVIDEND POLICY AT FPL GROUP, INC
In 1994 FPL Group, the parent company of Florida Power and Light Company, announced a reduction in its
quarterly dividend from $.62 ($2.48 annual) a share to $.42. This was the first–ever dividend cut for a healthy
utility, so the company did its best to explain to investors why it had taken such an unusual step.
Table 1.
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Year Dividend Earnings Dividend Dividend Earnings Dividend Dividend per share per share payout ratio
payout (%) per share payout payout (%) before ... Show more content on Helpwriting.net ...
After analysing industry and future prospects Broadhead concluded that FPL would need to have a
commitment to quality and customer service, increase its focus on the utilities industry, expand capacity, and
improve its cost position in order to match with the competitive environment. Moreover, FPL needed to
renew focus on its core business. It planed to sell several of the non–utility businesses. Furthermore,
Broadhead commenced an aggressive capital expenditure program designed to meet projected demand into
the next decade. FPL budgeted $6.6 billion, spread over five years, for the expansion.
The company also felt that it would be prudent to reduce debt, and that part of the cash savings from the
dividend cut would be used for this purpose. At the same time, the company announced plans to return part of
the cash saved by the dividend cut by repurchasing up to 10 million shares of stock over the next three years.
FPL explained that this would reduce shareholders' taxes.
We can say that the dividend changes have been so much less volatile than earnings changes because: 1)
management believed that shareholders prefer a steady progression in dividends 2) managers are reluctant to
make dividend changes that might have to be reversed. They are particularly worried about a dividend
increase, which would affect the stock price. Broadhead needed money to invest in FPL; therefore, he needed
to make the stock price increase in order to

How Can Analysts Identify Such Management Behaviour?
How can analysts identify such management behaviour?
5.1 Identify contexts where earnings management is likely
There are several ways that analysts can identify when it is likely that impairment has been used to manage
earnings. They can do this by seeing whether any impairments (particularly if they are abnormally large) are
preceded by conditions that might be conducive to earnings management.
5.1.1 Unexpectedly low or high earnings prior to the impairment
One explanation for the incentives behind using impairment to manage earnings is that firms will engage in
excessive write–downs of assets if earnings are unexpectedly low, as management take a bath in order to
increase their chances of meeting expectations in future periods ... Show more content on Helpwriting.net ...
Managers may believe the company is currently over–valued, as they have previously been delaying the asset
write–off, and artificially inflating earnings in the meantime. However, there may be endogeneity problems
with such a conclusion, as the observed patterns of insider information may be due to a firm's concerted share
buyback strategy rather than earnings management.
5.1.3 The timing of impairment
It has also been argued that the timing of impairments are correlated with earnings management. For,
managers often delay the announcement of an impairment until the last quarter, so they have a clearer picture
of the year's performance, and can confirm whether the firm is likely to meet earnings expectations or not
(Luong Thi, 2014).
This is a very simple indicator for an analyst to observe, with XYZ's $3.5bn impairment announcement
coming in the fourth quarter of Year 3. However, although the theory behind this relationship is compelling,
XYZ (like many companies) conducts a goodwill impairment review in Q4 every year, and so the impairment
will always take place then, regardless of the motivation behind it.
5.1.4 A change in senior management
And a final indicator that is common in the literature is whether there has been a recent change in senior
management (Abuaddous et al., 2014). As Masters–Stout et al. (2007) show that a change in CEO has a
statistically significant positive effect on the amount of impairment recorded,

Intel Case Study Essay
Intel Corporation, 1992
Case Study
Describe the characteristics of the industry in which Intel operates. How is Intel positioned in the industry?
Intel operates in an industry, which is comprised of products involving high research and development costs,
continuous product improvement and new innovations. The companies in the industry are having high
economies of scale and are knowledge based. It helps both the service and manufacturing sectors in the
growth process. Intel is positioned as a leading company with its ability to adapt to technological changes and
its strong relations with other businesses who are major buyers of integrated circuits. The industry in which it
operates is very competitive and comes with high risks as ... Show more content on Helpwriting.net ...
Further, keeping in view the strong competitive environment and fear of "Clones" by others, Intel is
constantly required to look for innovative products, which would need more funds for upfront expenditures.
In these situations, large cash positions would help Intel to avoid taking loans from outside, and in turn
interest costs, by using its own cash balances. A disadvantage of having large cash position would be that
cash has an opportunity cost. In other words, Intel could be forgoing profitable investment opportunities.
However looking at the data provided in the case, we can see that the cost of holding cash was small as they
yield high returns, above 170 bases points above U.S treasury bills, through investing in securities rated
above AA. Further, a cash rich company runs the risk of being careless as there may be reduced pressure on
the management team to perform better. Observing Intel's growing performance over a period of time, it
seems that currently it has no such problem. However in future, it may become a cause of concern for the
company.
Compare the three methods of repurchases: open market repurchase, fixed–price tender offer, and Dutch
auction. In the open market share repurchase, the firm may or may not declare the repurchase. Depending on
the market condition and the firm's position in the industry, the firm can decide when and how many

Mikes Bike Rollover 5
Rollover 5: Year 2015
Review of Previous Year's Results (2014)
From the industry benchmark report for 2014, (appendix) between the year 2013 and 2014 our share value
increased from 15.80 to 27.04 placing us ahead of everyone in our world. That is an increase of 172%. From
out firm reports (appendix), our net income of 2,764,446 unfortunately fell short of our profit forecast. of
3,501,014. Even though our share holder's value was the highest amongst our competitors, our profit before
taxes was second to Bikes 'R'Us by a total of $450,000. They had a profit of 4,339,987 while we only had a
profit of 3,949,209. A part of the reason why our net income didn't meet our forecasts and profit before taxes
fell short of Bikes'R'Us is due to ... Show more content on Helpwriting.net ...
Our reasoning for such a significant increase was to give us the ability to have a lower volume of supplies,
leaving more capacity for the new bike. Since we do not want high volume of sales for the mountain bike, we
decided to eliminate all advertising and public relationship expenses for the mountain bikes.
For the youth bike we decided to keep the advertising expenditure at 2 million in order to raise the awareness
of this new product line. This also helps establish a good market share in case competitors also decide to
launch the youth bike. Since we have a low capacity for the bike, we also decided to increase the price from
$370 to $400, resulting in an increase in gross margin. With this increase, we are still producing at a high yet
relatively low volume.
Operations Decisions
We decided to decrease the price of mountain bike production from $134 per bike to $108. The difference of
$26 for 11,000 units results in a saving of almost $300,000. In the meanwhile, we also decided to dump our
finish goods inventory, incurring a loss of $175,000. We decided to increase our capacity from 20,000 to
27,500 and efficiency from 1,000,000 to 2,000,000. We want to avoid increasing capacity significantly in
order to avoid low efficiency. At the same time we want to keep our wastage at a minimum. We reduced our
retail margin for the bike and sports store to 20% while reducing the discount stores to 27%. These new retail
margins

The Plan For Collaboration Airlines
Management is to projection, to plan, to coordinate, to arrange, and control the activity of others to achieve
the desired goal of an organisation. In that manager have to perform some activities as they effectively and
efficiently organize work with others. For instance, the top manager of United airlines and continental airlines
had made a slogan lets fly together, this made them worlds largest airline. The CEO of both companies used
merger strategy to achieve goals of making them merge airline which is more efficient and better place in
global challenging. The plans for collaboration airlines include the name under United airline and logo and
colors under continental airline. Both companies have invested in improvement product and service, so they
can achieve and sustain profitability.
In 1911, the Frederick Winslow Taylor 's theory of scientific management describes the one best way to done
a job. Taylor was working in the steel industry as a mechanical engineer in Pennsylvania. He was regularly
amazed by workers inefficiencies, were they uses enormously dissimilar technique to do same work. Workers
frequently taking jobs easily and Taylor believes worker taking more time as it can be done in less time. That
time almost there was no standards and workers get placed even they don't have the ability to do that task.
Taylor set quick fix by applying a scientific method to shop floor job. In that Taylor spent more than twenty
years for following the one best way.
Rakon

Wrigley Case
EFB340– FINANCE CAPSTONE
Case Study 1– The William Wrigley Jr. Company: Capital Structure, Valuation, and Cost of Capital
Group: 4–4
ABSTRACT
This report examines the impact a $3 billion bond issue will have on the value of the William Wrigley Jr.
Company. When analysing its various impacts, the expectations that arise as a result of the leveraged
recapitalisation include an increase in the share price & cost of capital and reduced earnings per share. In
essence, the potential benefits of a $3 billion bond issue are outweighed by the costs. Other potential impacts
were considered and it was expected that the debt issue would lead to an increased agency cost of debt while
voting control was not expected to change. The signal of ... Show more content on Helpwriting.net ...
In comparison the share price after the share repurchase scheme was projected to be $77.87 (appendix 2).
This represents an increase of 38.14% and this option would offer the greatest upside and superior return
when looking only at the benefits of investment for Wrigley's shareholders. 3.2 IMPACT ON WEIGHTED–
AVERAGE COST OF CAPITAL (WACC)
WACC is the rate used to discount future cash flows of a firm to their present value. By minimising WACC
firms are able to increase the value of the firm. For debt to affect value, there have to be tangible benefits and
costs associated with using debt instead of equity. If the benefits exceed the costs, there will be a gain in value
to equity investors from the use of debt. If the benefits are less than the costs, increasing debt will lower value
(Myers, 2001). Following a $3 billion leveraged recapitalisation, the investment grade of Wrigley decreases
from AAA to BB/B and consequently the cost of debt increases to 13% (see appendix 9) which is greater than
the post–capitalisation cost of equity of 9.84% (see appendix 8). It is for this reason that the WACC increases
from 9.24% to 9.49% (see appendices 5 – 10) which results in a reduction in firm value. 3.3 IMPACT ON
EARNINGS PER SHARE
Profit is often expressed as Earnings per Share (EPS) and is calculated as operating income divided by total
amount of common shares (Ross, Westerfield, Jordan, Thompson, & Christensen, 2007, p. 51). EPS has
two

Business Shareholder
Analysis of Shareholdings as at 31 March 2010 | | Authorised Share Capital | : RM100,000,000.00 | Issued
and Paid–up Share Capital | : RM69,739,750.00 | Class of Shares | : Ordinary Shares of RM0.50 each | Voting
Rights | : One vote per ordinary share | | | Shareholdings Distribution Size of Holdings | No. of Shareholders/
Depositors | (%) of Shareholders/
Depositors | No. of Share | (%) of Issued Capital | | | | | | 1 – 99 | 100 | 4.54 | 3,560 | 0.00 | 100 – 1,000 | 459 |
21.33 | 390,508 | 0.28 | 1,001 – 10,000 | 1,277 | 59.34 | 5,469,680 | 3.92 | 10.001 – 100,000 | 278 | 12.92 |
8,143,060 | 5.84 | 100,001 – 6,973,974 | 37 | 1.72 | 24,582,100 | 17.63 | 6,973,975 and above | 1 | 0.04 | ...
Show more content on Helpwriting.net ...
| Mayban Nominees (Tempatan) Sdn Bhd
– Malaysian Trustees Berhad For AMB Smallcap Trust Fund (240165) | 300,100 | 0.22 | 17. | Abu Bakar Bin
Suleiman | 286,400 | 0.21 | 18. | Lim Weng Ho | 282,700 | 0.20 | 19. | Universal Trustee (Malaysia) Berhad
– Alliance Optimal Income Fund | 276,200 | 0.20 | 20. | Aun Huat & Brothers Sdn Bhd | 251,800 | 0.18 |
21. | Gan Tuan Boon | 250,000 | 0.18 | 22. | Mayban Nominees (Tempatan) Sdn Bhd
– Etiqa Takaful Berhad (Group Fund) | 250,000 | 0.18 | 23. | Liew Wai Kiat | 237,600 | 0.17 | 24. | Mayban
Nominees (Tempatan) Sdn Bhd
– Mayban Life Assurance Berhad (Shareholders FD) | 200,000 | 0.14 | 25. | Mayban Nominees (Tempatan)
Sdn Bhd
– Etiqa Insurance Berhad (Life Annuity FD) | 200,000 | 0.14 | 26. | HSBC Nominees (Tempatan) Sdn Bhd
– HSBC (M) Trustee Bhd For MAAKL Dividend Fund (5311–401) | 170,000 | 0.12 | 27. | Mayban Nominees
(Tempatan) Sdn Bhd
–Etiqa Takaful Berhad (Annuity Fund) | 155,600 | 0.11 | 28. | Chia Kun Juan | 150,000 | 0.11 | 29. | Oh Siew
Heong | 150,000 | 0.11 | 30. | Olive Lim Swee Lian | 140,000 | 0.10 | | | Directors' Shareholding as per register
of directors as at 31 March 2010 | | No. of Shares Held | Name | Direct | *(%) | Indirect | (%) | | | | | | Tan Sri
Dato' Dr Abu Bakar Bin Suleiman | 286,400 | 0.21 | 13,000 | 0.01 | Dato' Dr Mohamad Hashim Bin Ahmad
Tajudin |

Evaluation on Share Repurchase Proposal of Blaine...
Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc.
Group 7
Contents
Executive Summary 3
Overview of problems 3
Analysis on Capital Structure & Payout Policies of Blaine 3
1. Inappropriate current capital structure and payout policies 3
2. Advantages and disadvantages of large share repurchase proposal 4
a. Effects of share repurchase on assets, liabilities and equity on balance sheet 5
b. Effects of share repurchase on debt ratios and interest coverage ratio 5
c. Effects of share repurchase on Earnings Per Share and Return On Equity 5
d. Bonus question–effects on wacc 6
4. Effects of the proposed share repurchase on shareholders 6
Appendix 7
Executive Summary
The main problem faced by BKI is over liquidity and ... Show more content on Helpwriting.net ...
First, current payout policies directly increase payout ratio by issuing large amount of new shares. High
payout ratio shows that the company has to spare a large amount of cash to pay dividends rather than invest in
more profitable projects.
In addition, given that dividends per share climbed slightly, earnings per share dropped greatly from 1.29 to
0.91, meaning current payout policies limit the value of shareholders.
Although riskier, debt financing helps company have a better financial structure and because Blaine
Kitchenware refuses to do so, we agree that their capital structure and pay out policies are not the most
appropriate for the firm.
2. Advantages and disadvantages of large share repurchase proposal
The large share repurchase should be recommended to Blaine's board. The followings are advantages of share
repurchase.
First, a large share repurchase will significantly increase shareholders' percentage ownership of BKI. BKI has
been under levered for decades. The company acquisitions of several small manufacturers made shareholders'
equity be diluted even more. In other words, shareholders, especially the main shareholders in Blaine's board,
are paying for BKI's over–liquidity. This share repurchase will not only give the board more flexibility to
allot dividends, but will lead to a stable development of BKI's business in the long run.
In addition, practically, conducting a large share repurchase by

Hnd Company Law Outcome 4
1. A company has a separate legal personality from the members in the company so in law it has separate
rights and liabilities. The company can enter contracts and own property which wouldn 't make the members
of the company liable only the company itself.
The case which illustrates this is Salomon v Salomon & co (1897) Salomon formed a limited company to take
over his business, himself, his wife, his daughter and four of his sons each subscribed for one share. When the
company fell on hard times and the liquidator was appointed salomon was entitked to be paid before the
unsecured trade creditors as he was a secured creditor. In this case the trade creditors recieved nothing and the
unsecured creditors claimed all the remaining assets on ... Show more content on Helpwriting.net ...
Documents which are to be delivered are a Memorandum of association which is a prescribed form signed by
the subcribers, it states that the subscribers wish to form a company and agree to be members of it, if the
company has a share capital then each subscriber agrees to subscribe for at least one share. The articles of
association are required if the company does not adopt model articles, they will be signed by the same
subscriber, dated and witnessed. Statement of proposed officers which is a statement giving the particulars of
the propsed director and company secretary if applicable. A statement of compliance which is a statement that
the requirements of the Companies Act in respect of registration have been compiled with. A statement of
capital and Initial shareholdings which will only be required for companies which are limited by shares, if a
company is limited by guarantee then a statement of guarantee is required. A registration fee is also payable
on registration.
4. The constitutional documents of a company comprises of the Articles of Association and any resolutions
and agreements it makes which will affect the constitution. The resolutions are decisions passed by members
which will affect the company 's constitution as they are used to introduce, amend or remove provisions in the
articles. Agreements made between the company and members are also deemed as amending the constitution.

Intel : Intel Cash Inflated Dell
Sec – Intel Cash Inflated Dell
What The Company Did?
Group of investors who endured losses in millions of dollars because of the wrongdoing, documented a claim
charging that the organization DELL had utilized unlawful accounting systems to hide secret kickback
payments by Intel Corp.
Intel Corp paid millions to the Dell in discounts on the basis of agreement to guarantee that Dell would not
utilize computer chips made by Advanced Micro Devices (AMD) in its PCs and machine servers. Those
refunds are subject to government and state antitrust request of Intel. At the point when Dell inevitably picked
AMD as a second supplier, Intel cut the discounts, and Dell 's financial position suffered as stated in
complain.
The installments from Intel were intended to guarantee that Dell utilized just Intel processors as a part of its
PCs, as indicated by the suit. The investors documenting the suit asked the U.S. Area Court in Austin, Texas,
to give the case class–activity status, saying that Dell shareholders were hurt when Dell expanded its benefits.
As indicated by the 335–page suit, 15 of Dell 's senior administrators took huge money related payouts by
utilizing an insider–exchanging technique to push the organization 's stock to high states, then offering their
shares and options.
The services pushed Dell stock from $22.59 to $42.57 in the year 2003 February to 2006 September, before
selling an aggregate of $3.3 billion value of shares, as indicated by the claim.

Distributions to Shareholders: Dividends and Share...
CHAPTER 14
DISTRIBUTIONS TO SHAREHOLDERS:
DIVIDENDS AND SHARE REPURCHASES (Difficulty: E = Easy, M = Medium, and T = Tough)
Multiple Choice: Conceptual
Easy:
Dividends versus capital gains Answer: d Diff: E
[i]. Myron Gordon and John Lintner believe that the required return on equity increases as the dividend
payout ratio is decreased. Their argument is based on the assumption that
a. Investors are indifferent between dividends and capital gains. b. Investors require that the dividend yield
and capital gains yield equal a constant. c. Capital gains are taxed at a higher rate than dividends. d. Investors
view dividends as being less risky than potential future capital gains. e. ... Show more content on
Helpwriting.net ...
Residual dividend policy Answer: a Diff: E
[viii]. Trenton Publishing follows a strict residual dividend policy. All else being equal, which of the
following factors are likely to cause an increase in the firm's per–share dividend?
a. An increase in its net income. b. The company increases the proportion of equity financing in its target
capital structure. c. An increase in the number of profitable projects that it wants to fund this year. d.
Statements a and b are correct. e. All of the statements above are correct.
Stock split Answer: e Diff: E
[ix]. A stock split will cause a change in the total dollar amounts shown in which of the following balance
sheet accounts?
a. Cash. b. Common stock. c. Paid–in capital. d. Retained earnings. e. None of the statements above is
correct.
Stock split Answer: b Diff: E
[x]. You currently own 100 shares of stock in Beverly Brothers Inc. The stock currently trades at $120 a
share. The company is contemplating a 2–for–1 stock split. Which of the following best describes your
position after the proposed stock split takes place?
a. You will have 200 shares of stock, and the stock will trade at or near $120 a share. b. You will have 200
shares of stock, and the stock will trade at or near $60 a share. c. You will have 100 shares of stock, and the
stock will

Mogen Company Financial Analysis
MoGen On January 10, 2006 the managing director of Merrill Lynch's Equity– Linked Capital markets
Group, Dar Maanavi, was reviewing the final drafts of a proposal for a convertible debt offering by MoGen,
Inc. As a leading biotechnology company in the United States, MoGen had become an important client for
Merrill Lynch over the years. In fact, if this deal were to be approved by MoGen at $5billion, it would
represent Merrill Lynch's third financing for MoGen in four years with proceeds raised totaling $10 billion.
Moreover, this "convert" would be the largest such single offering in history. The proceeds were earmarked to
fund a variety of capital expenditures, research and development expenses, working capital needs, as well as
a ... Show more content on Helpwriting.net ...
Over the years, the industry had made progress in shortening the approval time and improving the
predictability of the approval process. At the same time, industry R&D expenditures had increased 12.6%
over 2003 in the continuing race to find the next big breakthrough product. Like all biotech companies,
MoGen faced uncertainty regarding new product creating as well as challenges involved with sustaining a
pipeline of future products. Now a competitive threat of follow–on biologics or "biosimilars" began
emerging. As drugs neared the end of their patent protection, competitors would produce similar drugs as
substitutes. Competitors could not produce the drug exactly, because they did not have access to the original
manufacturer's molecular clone or purification process. Thus, biosimilars required their own approval to
ensure they performed as safely as the original drugs. For MoGen, this threat was particularly significant in
Europe, where several patents were approaching expiration. Funding Needs MoGen needed to ensure a
consistent supply of cash to fund R&D and to maintain financial flexibility in the face of uncertain challenges
an opportunities. MoGen had cited several key areas that would require approximately $10 billion in funding
for 2006: 1. Expanding manufacturing and information, and fill and finish capacity: Recently, the company
had not been able to scale up production to

Cooper Industries
Advanced Financial Management
Cooper Industries Case
March 30, 2009
Jesse Van Gestel
ID#200504399
Cooper Industries, Inc.
1. If you were Mr. Cizik of Cooper Industries, would you try to gain control of Nicholson File Company in
May 1972?
2. What is the maximum price that Cooper can afford to pay for Nicholson and still keep the acquisition
attractive from the standpoint of Cooper? [Treasury Bills yielded 5.6% in May 1972.]
3. What are the concerns and what is the bargaining position of each group of Nicholson stockholders? What
must Cooper offer group in order to acquire its shares?
4. On the assumption that the Cooper management wants to acquire at least 80% of the outstanding Nicholson
stock and make the same ... Show more content on Helpwriting.net ...
Nicholson's European distribution system could also be very helpful in expanding Cooper's sales in Europe.
As Cooper Industries sells more of their product to industry and Nicholson to the consumer market by
combining the companies they may be able to increase sales of both product lines to the market segment they
are weaker in.
2. FMV of Nicholson = $172,630,000
Per share value = $295.60
I was not able to come up with a valid firm value, as there was no information regarding how much working
capital will be increased by Nicholson over the next ten years, nor was there any information available
regarding how much capital expenditures would be increased. Capital expenditures were assumed to equal
depreciation and it was assumed working capital was not growing.
3.
H.K. Porter bought their shares with the intention of taking over Nicholson themselves, however as they were
unable to acquire enough shares to buy the company they are now looking to sell their shares. They would
obviously like to do this profitably if possible and their primary concerns are therefore the price and liquidity.
They are looking to get the most money out the stocks that they can and so price is of primary importance in
bargaining with them. However, they also want to be able to quickly liquidate their stocks and so would

prefer to receive cash. Though they have expressed that convertible preferred stock would be acceptable as
they know Cooper stock is stable and is easily

Stock Valuation Analysis
Stock Valuation
The value of a company's stock may entice an investor to offer money. Without knowing the proper value of
stocks, investors are hard–pressed to find the right time to buy or sell shares; and investors may miss
opportunities solely on the stock's market value (Zacks, n.d.). The following sections shall (1) calculate the
Company's SV based on its dividends*; and (2) discuss both those calculations' effect on shareholder value*
and the Company's dividend policies.
Calculations
To begin the calculations, the data points of cash dividend* per share, dividend yield*, and the stockholder's
equity* from the Company's FY2012–14 financial statements are required. To obtain the dividend yield, the
following equation shall be ... Show more content on Helpwriting.net ...
Keeping the Company's goal of maximizing shareholder value in mind, the best option based on the
aforementioned calculations is for the Company to increase dividend per share by $1.75. A crucial source for
increases in a business's dividend per share payout is a swing in growth strategy leading to the business's
decision to expend less of its earnings in seeking growth and expansion, thus leaving a greater segment of
profits available to be given to investors in the form of dividends (Maverick, 2015). The uptick in dividend
per share gives an investor more "bang for their buck" as it ultimately affects the ROI. Further, this is
apparent when comparing recalculated ROI. In Table 3: ROI Comparisons, ROI #1 represents the ROI based
on actual dividends per share; ROI #2 represents the recalculation based on the $1.75 increase.
Table 3: ROI Comparisons
Fiscal Year (FY) ROI #1 ROI #2 % Increase
2012 1.67% 3.42% 205%
2013 1.71% 3.46% 203%
2014 2.24% 3.99% 178%
Based on the comparison, the increased dividend per share clearly supports the idea of shareholder
maximization, while the other options are not as supportive.
Dividend Policies
The Company has noted that, in addition to making disciplined decisions regarding capital allocations, focus
has been maintained on expense control, resulting in higher returns on invested capital and allowing for a
return of value to shareholders through $7.0 billion in share repurchases and $2.5

Torstar Inc.
As the Torstar board meeting in April of 1998 was approaching, a memorandum on Torstar's dividend policy,
their repurchases and their strategy with regards to strategic acquisitions within their three business areas was
composed. The memorandum included pros and cons as well as recommendations with regards to the issues
to be discussed when the board gathered for their meeting. The dividend policy and the share repurchase
strategy are the main issues since the institutional shareholders preferred Torstar's historical share repurchases
and historical dividend pay outs. Management has during the last years focused on acquisitions, especially in
order to diversify their business through the children's supplementary education products (CSEP) ... Show
more content on Helpwriting.net ...
In fact, they could increase their debt to a 50 per cent debt–to–total–assets ratio and still manage their interest
payments (interest coverage = 3.017) as long as they do not suffer sustained decreases in EBIT. Furthermore,
Torstar's cash–to–sales ratio is sound at 3.6% which is well above the benchmark between 0.5% and 2%
(Koller et al, 2005). However, according to trade–off theory, as a firm increases their debt–tototal–assets ratio
the expected costs of financial distress will offset the tax shield. It is therefore important to evaluate which
level of debt–to–total–assets ratio is optimal. Torstar could face problems in paying their short–term
obligations as well as their long–term obligations. Dividends: A major advantage of Torstar raising the
dividends is that it could mitigate both agency, overconfidence and optimism problems since it reduces the
cash available to management. Thus, paying higher dividends will constrain Torstar's managers from the
questionable acquisitions in the CSEP segment. By using dividends, shareholders will gain cash which they
can invest in other public "pure plays", hence the shareholders can diversify their own risk. It is also a way
for Torstar to signal stabile cash flows, increased past earnings and expected sustainable future earnings. The
market could however interpret an increase in dividends as if there are fewer investment opportunities. The
market already has the

Common stock repurchase and market signalling
Journal
of Financial
COMMON
Economics
9 (1981) 139–183.
STOCK REPURCHASES
North–Holland
Publishing
Company
AND MARKET SIGNALLING
An Empirical Study*
Theo VERMAELEN lJ/niversity of British Columbia, Vancouver, BC, Canada V6T 2 W5
Received January
1980, final version
received January
1981
This paper examines the pricing behavior of securities of firms which repurchase their own shares. The
results are consistent with a market in which investors price securities such that expected arbitrage profits are
precluded. The results are also consistent with the hypothesis that firms offer premia for their own shares
mainly in order to signal positive information, and that the market uses the ... Show more content on
Helpwriting.net ...
The direction of this signal is ambiguous.
It may be that the company perceives no profitable use for internally generated funds because of a lack of
growth opportunities.

On the other hand, especially when a company offers to buy its shares at a substantial premium above the
market price, management may believe that their company is undervalued.
The tender offer then represents an attempt to pass on the value of this inside information to the current
shareholders.
(2)
Dividend or personal
taxation hypothesis
Firms repurchase stock in order to let the shareholders benefit from the preferential tax treatment of
repurchases relative to dividends; the tax advantage may be weakened to a certain extent by the provisions of
Section
302 of the Internal
Revenue Code, which treats redemption of stock as a capital gain only if one of the following cases applies:
(i) the redemption is 'substantially disproportionate' to the extent that after the repurchase, the percentage
ownership of the shareholder must be less than 80 7; of the percentage ownership he had, before the
repurchase; by railroad companies in certain
(ii) the stock is issued reorganizations, defined by section 77(c) of the Bankruptcy
Act;
not equivalent' to paying a (iii) the distribution is 'essentially dividend. It is not

Essay on Corporate Financial Strategy: Dividend Policy
How to determine the most appropriate dividend policy has become one of the hottest topics in recent years
as dividend decisions continue to have a significant impact on both investment and finance decisions
(company's performance overall), affecting financial managers considerations when deciding how much
earnings to reinvest and how much to be paid to shareholders (Watson and Head, 2010). There are already
many theories either supporting or criticising the impact of dividend decisions on a firm's value. Litner (1956)
indicated that dividends are paid by mature companies who have positive earnings instead of smaller firms
and managers always target a long–term dividend payout that can be sustained. This essay will critically
evaluate ... Show more content on Helpwriting.net ...
This indicates that the change in EPS may be because of other factors rather than Vodafone's retained
earnings. The factor of this result might be because the share price is incorporated with the information in the
capital market.
2013 2012 2011 2010 2009
Dividend per share 10.19p 9.52p 8.90p 8.31p 7.77p
EPS 15.65p 13.74p 16.75p 16.11p 17.17p
Still, increase in cash dividends does not always give a good signal to the investors. Particularly when
Vodafone increases dividends, the company reduces the cash flow available to use for investments. This not
only suggests that companies might lack of investments opportunities but also could be a sign of
management's failure. However, Modigliani and Miller theory criticised this signalling effect by arguing that
dividend policy is irrelevant to the value of a firm assuming a perfect capital market exists (DeAngelo &
DeAngelo, 2006). Any changes in dividend policy made by firms will not affect the share price. Under this
theory, everyone has the same information available in the market; therefore changes in dividends do not give
any signals to market, especially to investors. However, there is a challenge on this theory where the many
factors involved in dividend payout by company such as transactions costs and taxes as well as agency
problems. Hence in reality, this theory is not practicable. By contrast they are agreed that investment policy
(but not dividend policy) adopted by companies do affect the

Assignment #1. Pittsburgh Campus. Jingyi Guo. 1.Financial
Assignment #1
Pittsburgh Campus
Jingyi Guo
1. Financial Markets and Banks
1.1 Roles of the Financial Markets
In Financial Intermediation, the main functions of the financial markets are summarized as monitoring,
signaling, smoothing, providing liquidity, and improving capital allocation. In A Conceptual Framework for
Analyzing the Financial Environment, the roles of the financial system consist of the following 6 basic
functions:
(1) Clearing and Settling Payments: The financial markets allow for the exchange of payments for goods and
services.
(2) Pooling Resources and Subdividing Shares: The financial markets allow firms to borrow from pooled
resource of multiple investors and allow investors to diversify by investing in various ... Show more content
on Helpwriting.net ...
Banks use on–demand retail deposits and other short–term wholesale funding to finance longer–term loans
and offer liquid asset to savers.
(2) Liquidity Transformation
Liquidity provision is essential to financial intermediation. In Financial Intermediaries and Liquidity
Creation, the key insight is that bank debts need to be information–insensitive and thus provide liquidity.
Most banks are required to hold only a portion of their bank deposits as cash available for immediate
withdrawals. Therefore, the assets of a bank are less liquid than its liabilities.
(3) Credit Transformation
Credit transformation involves the arbitrage of a bank's credit risk by making loans and investing in securities
with a lower credit standing and higher yield than the bank's financing instruments.
Banks also facilitate the clearing and settling of payments and help overcome asymmetrical information.
2. Wholesale Funding
2.1 Repurchase Agreement (Repo)
How it functions:
A repo is selling a security with a promise to redeem it in the future. In substance, a repo is a collateralized
loan.
For bilateral repo, borrower and lender transact directly with one another. In a bilateral repo, the borrower
sells a security to the lender on the understanding that the borrower will repurchase the security on the
following day at a premium, which is implicitly an interest payment to the lender for the use of its funds.
For

The Impact Of A Share Repurchase Program For A Fictional...
Summary
We considered the impact of a share repurchase program for a fictional company – Blaine Kitchenware, Inc.
It was determined that the liquidation of $209 million in cash and marketable securities and the addition of
$50 million in long–term would result in a capital structure which was reasonable and sustainable. Overall,
tax expense would be lower, the value of the firm would increase and the riskiness of the company's equity
would edge just a touch higher.
From the perspective of both family and non–family shareholders, a share repurchase program is the right
thing to do. The only possible objector to the proposal would likely be the U.S. Secretary of the Treasury.
Background information
Blaine Kitchenware, Inc. (BKI) is a publicly–traded, United States–based producer of residential kitchen
small appliances (e.g. waffle irons, coffee makers, etc.). Relative to its average competitor in this
marketspace, BKI has a strong EBITDA Profit Margin (22%, mean 18%) and Net Profit Margin (16%, mean
10%) but a much weaker ROE (11%, mean 25.9%). See Appendix A for a full financial comparison.
The company's current and long–standing policy to remain completely unlevered in order to keep cash
available for possible future acquisitions and eliminate the interest and fee expenses associated with debt
financing. As of 12/31/06 BKI had a cash stockpile of $53.6 million and no net debt.
While the "appropriateness" of this policy may be debated, a few red flags have started to

Accounting: Quick Fix
How will a buyback of shares provide a "quick fix" for EPS (earning per share)? A buyback allows
companies to invest in themselves. By reducing the number of shares outstanding on the market, buybacks
increase the proportion of shares a company owns. Buybacks can be carried out in two ways: 1. Shareholders
may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of
their shares within a certain time frame and at a premium to the current market price. This premium
compensates investors for tendering their shares rather than holding on to them. 2. Companies buy back
shares on the open market over an extended period of time. The typical advantage of a share buyback is that it
increases ... Show more content on Helpwriting.net ...
A company with poor financial ratios and shady recent earnings results that announces a stock repurchase
should be looked upon with much more trepidation. The next time you see a stock buyback announcement;
take a close look at the company involved before making a final determination of what it may mean for the
future of the stock. Is a share buyback ethical? In this case, a stock buyback is ethical. International Network
Solutions is considering a share buyback which is, in effect, an investment in the company 's own stock. They
are purchasing stock because they expect to enhance shareholder value. In an era of abundant IPOs and stock
placements, corporations also are announcing record buybacks of their outstanding shares. Repurchases serve
a variety of purposes, from increasing earnings per share to providing stock for employee benefit plans.
Although buybacks can be a sound part of a publicly held corporation's financial strategy, they are complex
endeavors that involve SEC rules, proper accounting and disclosure under GAAP, and certain federal income
tax implications (CPA Journal, 2007). There are several cases when a share buyback is not ethical and it
mainly deals with insider information. Below are examples of unethical share buybacks. A stock buyback will
not be ethical if a company buys back its shares at the same time that executives are selling

Essay about How the Downfall of RBS Could Have Been Prevented
1. What is the core idea behind agency theory?
2. Can you use agency theory to analyse:
a. the rise and downfall of RBS;
b. the mortgage debt crisis more generally?
3. Who is/are the principal(s) and who is/are the agent(s) in your analysis?
Can you think of one threat that arises from the use of agency theory in developing measures aimed to
prevent future banking and/or financial failures?
The emergency rescue of the Royal Bank of Scotland in 2008 has cost the UK government thus the British
taxpayer a huge amount of money. Many people are upset about the high bonuses the RBS management
board have received, both because of the outrageously high amount and because the performance of the bank
on the long–term was not good at all. ... Show more content on Helpwriting.net ...
By pursuing this, the manager (agent) also pursues the goals of the shareholders (principals). At least that is
the idea behind it.
The Royal Bank of Scotland – just like many other banks and businesses – paid out its managers considerable
bonuses for their performances. Managers at RBS started maximising their bonuses by aggressive actions
such as take overs and investing in complex financial products. These actions caused the profits of RBS to
grow rapidly, which meant high bonuses for the managers. These actions, however, also meant the stability
and financial safety of RBS on the long–term got worse and worse. This was not a problem for the managers
as they had already earned their bonuses. A different bonus structure probably would have prevented the
reckless actions of the RBS managers.
Bonuses of managers could be paid out in shares which they are obliged to keep for a certain time period, e.g.
5 years. That way the share price on the long term is of importance for the managers and the goal of the
shareholders is aligned with the goal of the managers. However, the share price is dependent on much more
factors than the performance of just one manager. There is a risk that managers would feel they have little to
none influence on the share price and still make risk full decisions. Another possibility would be determining
the bonus of a manager on their performance in the long run, e.g. 5 years. A combination of these two bonus

Acct 553 Week 5
14–24.
What is the purpose of the dividends received deduction? What corporations are entitled to claim this
deduction? What dividends qualify for this deduction?
The purpose of dividends–received deduction is to prevent triple taxation of earnings. The Dividend Received
Reduction (DRD) is the concept where a corporation receiving a dividend from another corporation does not
have to pay taxes on that dividend they received.
Code Sec243 of the IRS provide relief to domestic corporations, when paying dividends to its shareholders,
which is subject to tax. In another words, the relief is the paid dividend to others corporations, in which the
income would be tax a third time after the recipient corporation pays dividend to its ... Show more content on
Helpwriting.net ...
Type G: Transfer
Type G reorganizations involve bankruptcy by permitting the transfer of all or some of a failing company 's
assets to a new corporation.
17–24.
Define and differentiate a spin–off, split–off, and split–up.
Split–up: An arrangement whereby a parent corporation transfers all of its assets to two or more corporations
and then winds up its affairs. When a split–up occurs, the shareholders of the parent corporation surrender the
total amount of their stock in exchange for stock in the transferee corporation.
Split–Off: The process whereby a parent corporation organizes a subsidiary corporation to which it transfers
part of its assets in exchange for all of the subsidiary 's capital stock, which is subsequently transferred to the
shareholders of the parent corporation in exchange for a portion of their parent stock. A split–off differs from
a spin–off in that the shareholders in a split–off must relinquish their shares of stock in the parent corporation
in order to receive shares of the subsidiary corporation whereas the shareholders in a spin–off need not do so.
Spin–Off: The situation that arises when a parent corporation

The Middle Of The 19th Century
Introduction
The middle of the 19th century, it was thought to be an unexceptional practice if a company's purchase of its
own shares back. However, the point of view against the continued existence of the power began to grow in
force after the advancement of the model of limited liability. The ruling out on share repurchases was as a
final point added into the common law in Trevor v Whithworth. The prevention was afterward enacted in
companies' legislation in England and subsequently in the different Commonwealth countries, as well as
Australia. The Act integrated two requirements of particular consideration to the Lords. Firstly, there was a
condition that the company should give its nominal capital. Secondly, the legislation provided for an all–
inclusive practice for reducing capital and the assets of the company.
It is an essential reason of corporate law that the share capital of a company should be maintained.
Nonetheless, a corporation limited by shares is open to shrink its share capital by a ruling of its members
provided that the decrease is not prohibited by its Bylaws and Memorandum of Association and the company
act in accordance with the procedures set out in the Corporation Act 2001. The concept of reduction in share
capital is delineated as the method of lessening a company 's shareholder equity through share cancellations
and buy–backs. The reduction of funds is done by companies for several reasons as well as the increasing
value of shareholder and

Financial Principals and Policies
Xin Zheng xinzheng@callutheran.edu Chapter 1
2. What are the differences between shareholder wealth maximization and profit maximization? If a firm
chooses to pursue the objective of shareholder wealth maximization, does this preclude the use of profit
maximization decision–making rules? Explain.
Profit maximization means the company makes profit maximize. Maximize shareholder wealth states that
management needs to bring maximize the value for its owners by make the most efficient resources and
reasonable financial management. Therefore, shareholder wealth maximization include the profit–
maximization model, it considers not only profit maximization model, but also the timing of return and the
risk of the company. The most important the ... Show more content on Helpwriting.net ...
As we know, the returns offered to creditors are fixed but the returns to stockholders are variable. In this case,
RJR was acquired by KKR, the debt of RJR increased from 38% of total capital to nearly 90% of total capital.
This will decrease nearly 20% of the value of RJR's bonds. The owner try to get the hope of receiving better
returns through increase the risk of the company's investments. So that, stockholders be influenced when this
happen. The reason is that they don't have chance to share in these higher returns. Because of this loss of
value, Metropolitan Life Insurance Company and other large stockholders sued RJR for violating the rights of
stockholder and protections under the bond covenants. Ultimately, they settled the suit due to the benefit of
Metropolitan. Stockholders cannot resist this transaction even through this decision may have high risk.
Chapter 2
2. An investor bought 100 shares of Venus Corporation common stock 1 year ago for $40 per share. She just
sold the shares for $44 each, and during the year, she received four quarterly dividend checks for $40 each.
She expects the price of the
Venus shares to fall to about $38 over the next year. Calculate the investor's realized percentage holding
period return.
The investor's realized percentage holding period return= ( Income+ Ending Value– Beginning value)/
Beginning Value
[(4400–400+4*(40))/4000]*100%=14%

The Payment Of Dividends And The Issue Of Shares

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