Loading...

Messages

Proposals

Stuck in your homework and missing deadline? Get urgent help in $10/Page with 24 hours deadline

Get Urgent Writing Help In Your Essays, Assignments, Homeworks, Dissertation, Thesis Or Coursework & Achieve A+ Grades.

Privacy Guaranteed - 100% Plagiarism Free Writing - Free Turnitin Report - Professional And Experienced Writers - 24/7 Online Support

Problem#14

09/08/2020 Client: joediv12 Deadline: 7 Days

 


Question 1


Integrated Waveguide Technologies (IWT) is a 6-year-old company founded by Hunt Jackson and David Smithfield to exploit metamaterial plasmonic technology to develop and manufacture miniature microwave frequency directional transmitters and receivers for use in mobile Internet and communications applications. IWT’s technology, although highly advanced, is relatively inexpensive to implement, and its patented manufacturing techniques require little capital as compared to many electronics fabrication ventures. Because of the low capital requirement, Jackson and Smithfield have been able to avoid issuing new stock and thus own all of the shares. Because of the explosion in demand for its mobile Internet applications, IWT must now access outside equity capital to fund its growth, and Jackson and Smithfield have decided to take the company public. Until now, Jackson and Smithfield have paid themselves reasonable salaries but routinely reinvested all after-tax earnings in the firm, so dividend policy has not been an issue. However, before talking with potential outside investors, they must decide on a dividend policy. Your new boss at the consulting firm Flick and Associates, which has been retained to help IWT prepare for its public offering, has asked you to make a presentation to Jackson and Smithfield in which you review the theory of dividend policy and discuss the following issues.


a.         (1) What is meant by the term “distribution policy”? How has the mix of dividend payouts and stock repurchases changed over time?


(2) The terms “irrelevance,” “dividend preference” (or “bird-in-the-hand”), and “tax effect” have been used to describe three major theories regarding the way dividend payouts affect a firm’s value. Explain these terms, and briefly describe each theory.


(3) What do the three theories indicate regarding the actions management should take with respect to dividend payouts?


(4) What results have empirical studies of the dividend theories produced? How does all this affect what we can tell managers about dividend payouts?


b. Discuss the effects on distribution policy consistent with: (1) the signaling hypothesis (also called the information content hypothesis) and (2) the clientele effect.


c.         (1) Assume that IWT has completed its IPO and has a $112.5 million capital bud-get planned for the coming year. You have determined that its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution approach to determine IWT’s total dollar distribution. Assume for now that the distribution is in the form of a dividend. Suppose IWT has 100 million shares of stock outstanding. What is the forecasted dividend payout ratio? What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million?


(2) In general terms, how would a change in investment opportunities affect the payout ratio under the residual distribution policy?


(3) What are the advantages and disadvantages of the residual policy? (Hint: Don’t neglect signaling and clientele effects.)


d.         (1) Describe the procedures a company follows when it makes a distribution through dividend payments.


(2) What is a stock repurchase? Describe the procedures a company follows when it makes a distribution through a stock repurchase.


e. Discuss the advantages and disadvantages of a firm repurchasing its own shares.


 f. Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding.


(1) Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share?


2) Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share?


(3) Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?


g. Describe the series of steps that most firms take when setting dividend policy.


 h. What are stock splits and stock dividends? What are the advantages and disadvantages of each?


i. What is a dividend reinvestment plan (DRIP), and how does it work?


Question 2


Gamut Satellite Inc. produces satellite earth stations that sell for $150,000 each. The firm’s fixed costs, F, are $1.5 million, 20 earth stations are produced and sold each year, profits total $400,000, and the firm’s assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $10 million to assets and $500,000 to fixed operating costs. This change will reduce variable costs per unit by $5,000 and increase output by 30 units. However, the sales price on all units must be lowered to $140,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 18%, and it uses no debt.



  1. Determine the variable cost per unit

  2. Determine the new profit if the change is made

  3. What is the incremental profit?

  4. What is the projects expected rate of return for the next year (defined as the incremental profit divided by the investment)?

  5. Should the firm make the investment? Why or why not?

  6. Would the firm’s break-even point increase or decrease if it made the change?

  7. Would the new situation expose the firm to more or less business risk than the old one? Show workings


Submit your answers in a Word document

Homework is Completed By:

Writer Writer Name Amount Client Comments & Rating
Instant Homework Helper

ONLINE

Instant Homework Helper

$36

She helped me in last minute in a very reasonable price. She is a lifesaver, I got A+ grade in my homework, I will surely hire her again for my next assignments, Thumbs Up!

Order & Get This Solution Within 3 Hours in $25/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 3 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 6 Hours in $20/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 6 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 12 Hours in $15/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 12 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

6 writers have sent their proposals to do this homework:

Assignment Hub
Online Assignment Help
Homework Guru
Writer Writer Name Offer Chat
Assignment Hub

ONLINE

Assignment Hub

I feel, I am the best option for you to fulfill this project with 100% perfection. I am working on this forum since 2014 and I have served more than 1200 clients with a full amount of satisfaction.

$115 Chat With Writer
Online Assignment Help

ONLINE

Online Assignment Help

I am an elite class Ph.D. writer who can deliver you a supreme level of content within your given deadline. I will give you plagiarism free content within your given timeline.

$115 Chat With Writer
Homework Guru

ONLINE

Homework Guru

I am a Ph.D. writer with more than 9 years of working experience in Writing. I have successfully completed more than 4500 projects for my clients with their full amount of satisfaction. I will provide you super quality work according to your given requirements and deadline with ZERO plagiarism. I can manage business and professional writing against very reasonable prices.

$120 Chat With Writer

Let our expert academic writers to help you in achieving a+ grades in your homework, assignment, quiz or exam.

Similar Homework Questions

Tone It Down (submission) - Normalmente pido tacos voy al restaurante los lunes - Napoleon let china sleep - Deakin guide to assignment writing and referencing - Egadim - Eris in the odyssey - 4s week 15 assignment IA - Legal,Ethical & Social Environment - Health talk in community health nursing - Chapter 7 grader project excel - What Works: Prevention - Given this information is locational arbitrage possible - Dramatic irony in the yellow wallpaper - "A" WORK IN 18 HOURS - Does domestic partnership affect fafsa - Resources and capabilities analysis - Assassin's creed freedom cry common sense media - 1000 psi to mpa - Auditing user developed applications - Consider the circuit shown in figure 1 - 8 point dif fft example - Tracy winter works at a publishing firm in london - Common mode signal in op amp - What are some equivalent fractions to 3 4 - Civil 3d sanitary sewer analysis - Student exploration titration gizmo answer key activity - Dielectric breakdown in capacitor - Jobs for melancholic personality - EBP - Journal entry on shakespeare - Case study - Scarcity occurs because of eco 365 - 5 indicators of a chemical change - Human impact on the environment poster - Weekly Journal week 38 - How to address a key selection criteria - Sort the following reactions as either endothermic or exothermic - Charles tyrwhitt 3 for 99 2018 - .610 as a fraction - Eastern community legal centre boronia - Vce english advice for teachers - Mc top shelf products - Root studios senior pictures - Performance management at vitality health enterprises inc solution - Potentiometer measurement of resistance experiment - 2/3 - Mehlhorn data structures and algorithms - One step equations with fractions worksheet - Asp.net core 3.1 documentation - Followership vs servant leadership - 3 layers of heart muscle - Treasure island teacher guide - Bank alfalah car financing pakistan - Compare walmart and amazon's business models and business strategies - The damned human race thesis - At dusk by natasha trethewey analysis - It infrastructure security best practices - Glyhb test - Individual healthcare identifier number - Bbc co uk scotland education wwww living index choice shtml - Telecommunication companies in qatar - BUS225: Project Management - Mq uni exam timetable - Tanglewood case 5 disparate impact analysis - How to find the endpoint when given the midpoint - Order 2093473: 3 questions/ 1 Paragraph - Social psychology 9th edition pdf aronson - Oxidation state of mno4 - When was al grant born - Nursing PICO PICOT - Sparknotes pride and prejudice - Why do seals pound tridents into coffins - Crash time in project management - Dissertation_Internet Safety of Children and Adolescents - Value added approach to calculating gdp - Rjr nabisco case solution - Compare and analyze the impact of widowhood during this stage of life - The automobile has a mass of 2 mg - Periodic table excel spreadsheet - Managers use standard beverage costs to establish - The mechanical universe video 15 answers - New wave cable tv channel guide - 4 bit comparator circuit diagram - Protein synthesis practice 2 - Nur512-Reply to this discussion Andree - Find the indicated z score shaded area is 0.4013 - Hay una silla al lado del escritorio en ingles - Coefficient of performance heat pump calculator - Ethan zuckerman net worth - 3 day push pull legs workout routine pdf - Apply: Regression, Use the data to construct a model, Construct a multiple regression model. - Glen waverley secondary college vce results - Attitude 100 percent ppt - Sick of carpet bag government - Photoelectron spectroscopy ap chemistry worksheet - Hepa filter test methods - Total net operating working capital - Why is long run aggregate supply vertical - Vsan witness appliance compatibility - The orbit of mercury lab answers