Corporate Finance

Electronic Timing Inc (ETI) is a small company founded 15 years ago by electronic engineers Tom Miller and Jessica Kerr. EIT manufactures integrated circuits to capitalize on the complex nixed-signal design technology and has recently entered the market for frequency timing generators, or silicon timing devices, which provide the timing signals or “clocks” necessary to synchronize electronic systems. Its clock products originally were used in PC video graphics applications, but the market subsequently expanded to include motherboards, PC peripheral devices, and another digital consumer electronics, such as digital television boxes and game consoles ETI also designs and markets custom application-specific integrated circuits (ASICs) for industrial customers. The ASIC’s design combines analog and digital, or mixed signal, technology. In addition to Tom and Jessica, Nolan Pittman, who provided capital for the company, is the third primary owner. Each owns 25 percent of the 1 million shares outstanding. The company has several other individuals, including current employees, who own the remaining shares.
Recently, the company designed a new computer motherboard. The company’s design is more efficient and less expensive to manufacture, and the ETI design is expected to become standard in many personal computers. After investigating the possibility of manufacturing the new motherboard, ETI determined that the costs involved in building a new plant would be prohibitive. The owners also decided that they were unwilling to bring in another large outside owner. Instead, ETI sold the design to an outside firm. The sale of the motherboard design was completed for an after-tax payment of $30 million.
1. Tom believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? How will it affect the value of the company?
2. Jessica believes the company should use the extra cash to pay off the debt and upgrade and expand its existing manufacturing capability. How would Jessica’s proposals affect the company?
3. Nolan favors a share repurchase. He argues that a repurchase will increase the company’s P/E ratio, return on assets and return on equity. Are his arguments correct? How will a share repurchase affect the value of the company?
4. Another option discussed by Tom, Jessica and Nolan would be to begin a regular dividend payment to shareholders. How would you evaluate this proposal?
5. one way to value a share of stock is the dividend growth, or growing perpetuity, model. Consider the following: The dividend payout ratio is 1 minus b, where b is the “retention” or “plowback” ratio. So the dividend next year will be the earnings next year, E1, times 1 minus the retention ratio. The most commonly used equation to calculate the sustainable growth rate is the return on equity times the retention ratio. Sustaining these relationships into the dividend growth model. We get the following equation to calculate the price of a share of stock today:
P0= E1 (1 – b) / Rs – ROE x b
What are the implications of this result in terms of whether the company should pay a dividend or upgrade and expands its manufacturing capabilities. Explain.
6. Does the question of whether the company should pay a dividend depend on whether the company is organized as a corporation or an LLC?

pls I need the solution urgently ,, pls help

  1. 👍
  2. 👎
  3. 👁
  1. answer

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. Computer Applications

    Who is affected by the electronic theft of song? Please help 1) Just the singer 2) Just the songwriter 3) Only the record company 4) the singer, the songwriter, the record company, producers and ultimately the consumers

  2. English

    Choose the correct sentence. 1: A: Did you know Judy, that the first atomic bomb was exploded on July 16, 1945? B:Did you know, Judy, that the first atomic bomb was exploded on July 16, 1945?*** C:Did you know, Judy, that the

  3. Statistics

    The average age of chemical engineers is 37 years with a standard deviation of 4 years. If an engineering firm employs 25 chemical engineers, find the probability that the average age of the group is greater than 38.2 years old.

  4. English

    Which word or phrase is a suitable replacement for the word or at the beginning of the second sentence in this excerpt? A database is a collection of electronic information that can be accessed using a set of software commands.

  1. English

    1. He is less tall than Tom. 2. Tom is taller than he. 3. He is less smart than Tom. 4. Tom is smarter than he. 5. He is less big than Tom. 6. Tom is bigger than he. 7. He is less careful than Tom. 8. Tom is more careful than he.

  2. Apex personal finance

    Mack opened a CD 10 years ago at an interest rate of 7.8% compounded monthly. According to the rule of 72, when did she have half as much money as she does now? A. About 9.2 years ago B. About 4.6 years ago C. About 3.9 years ago

  3. Chemistry AP

    what does this mean (we are on quantum) The figure below represents part of the emission spectrum for a one-electron ion in the gas phase. All the lines result from electronic transmissions from excited states to the n = 3 state.

  4. Busines Calculus

    Im so lost on this... Cannon Precision Instruments makes an automatic electronic flash. The estimated marginal profit associated with producing and selling theses electronic flashes is 𝑃′(𝑥𝑥) = −0.004𝑥+ 20 dollars

  1. chemistry

    1.) If the spacing between two electronic energy levels in atom A is larger than in atom B, then the wavelength of the light emitted by atom B will be longer. 2.) If the spacing between two electronic energy levels in atom A is

  2. Chemistry-help needed

    I am asked to draw the 'dot and cross' diagram to show the ionic bonding in sodium chloride. I am asked to show only the outer electronic structure. Sodium has 2.8.1 electronic configuration. After losing 1 electron to chlorine,

  3. Science please help

    List and briefly outline the six different periods into which the Paleozoic era is divided. The six periods: 1:Cambrian, which was 545 million years ago. 2:Ordovician, which was 490 million years ago. 3:Silurian, which was 445

  4. physics

    A special electronic sensor is embedded in the seat of a car that takes riders around a circular loop-the-loop at an amusement park. The sensor measures the magnitude of the normal force that the seat exerts on a rider. The

You can view more similar questions or ask a new question.