The two Guys experienced gone to high school alongside one another and were disenchanted with their prospective buyers as mechanics at a farm equipment manufacturer. If Swenson chooses to pay out dividends, she will have to also choose the magnitude of the payout.
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The Dividend Policy This case is about the impact of an environmental factor External issue on dividend policy of the firm Internal issue. The environmental disaster was Hurricane Katrina which was caused the huge destruction across the south-eastern United States. Because of the storm, the stock market notably fell down.
Since it is possible that the price of the shares once more increase even more than before in the near future, Ashley Swenson, chief financial officer CFO of Gainesboro Machine Tools Corporation has the dilemma to buy back stock or to spend the money as dividend the shareholders.
In fact, the question is: How can she forecast the fortune of the stock market? In the other word, what are the driving forces as the external factors which are affecting on internal factors such as dividend policy?
At the first, she can design a strategic plan including current and future BCG matrix.
I think that one of the best reference books which has established a logical relationship between BCG matrix and Dividend policy is: Where is the location of the firm in BCG matrix? On the other hand, if we see Exhibit 7, we will find that the expected growth rate of sales next years for high dividend payout companies is going down whereas the zero-payout companies will have the high growth rate of sales.
We can observe this fact on consolidated Income Statement of Gainesboro Exhibit 1 where the negative growth rate from to accompanied by dividend payout has pushed the current situation of this company on Quadrant IV of BCG matrix which is named Dogs.
It means that the current strategies of Gainesboro could be Retrenchment, Divestiture, and Liquidation.
In this case, the new situation of company will be on Quadrant I of the BCG matrix Question Marks where the dividend policy of this company should be Zero — dividend payout.
Here, I would like to bring you so many logical reasons which approve the Zero — dividend payout as the best option for dividend policy of Gainesboro as follows: I calculated them in accordance with Exhibit 2 please see my spreadsheet below cited:In mid-September , Ashley Swenson, the chief financial officer of this large CAD/CAM (computer aided design and manufacturing) equipment manufacturer must decide whether to pay out dividends to th.
Gainesboro Machine Tools Corporation 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 Gainesboroâ€™s management willing to vary, and which elements remain fixed as a matter of the companyâ€™s policy? Gainesboro Shares Repurchase Share Market revaluating assets before company listing, high premium in issuance of right share/Repeat IPO etc.
while secondary market related problems was stock splits and stock price manipulations through block trading, circular trading and insider trading.
The case serves as an omnibus review of the many practical aspects of the dividend and share buyback decisions, including (1) signaling effects, (2) clientele effects, and (3) finance and investment implications of increasing dividend payout and share repurchase decisions.
of Gainesboro Machine Tools Corporation, paced the floor of her.
0 Share Repurchase Considerations Another option to consider for the payout from ACTSC at University of Waterloo. Gainesboro Machine Tools Corporation. 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 Gainesboroâ€™s management willing to vary, and which elements remain fixed as a matter of the companyâ€™s policy?