Dividend Case Studies Samples For Students

How should Jonathan describe the rationale of the dividend discount model (DDM) and demonstrate its use in calculating the justifiable price of PCU share?
Firstly, Jonathan should explain to Dwayne that there are different methods how a financial or a security analyst can analyze the fundamental and technical aspects of a security, which in this case is the PCU share, including its price, the forecasted growth rates, and a lot of other aspects. There is more than one way of predicting the future stock price of a company . A security analysis can focus on the fundamental aspects of the company such as the ...

Cost of Equity Capital

Cost of equity can defined as the opportunity cost of raising finances through equity. Equity comprises of ordinary share capital and retained earnings of a company. The rate of return expected by investors is the same as the cost of equity. Cost of equity is therefore important in valuation of shares. However, unlike debt securities, which have fixed interest, dividend paid on equity securities fluctuate over time. It is in the discretion of the management of any company discretion to determine how much dividend to pay in case they decide to pay dividend. This makes it hard to estimate the ...

Introduction

Analysis of Nike’s dividend over three years period
Nike has been paying dividends to its shareholders every year based on its level of earnings. The three years analysis of Nike’s dividend distribution has been shown in the table below. Nike's dividend per share and earnings per share has increased which also indicates that revenue and profit of the company had increased over that period. (Gibson, 2008) The trend of the past three years projected that the company has improved its market position and was able to provide enough dividend to its shareholders for their investment in the ...

Question 1

A. Yes. The dividend policy of the company is paying a constant dividend, which is occasionally increased as the company grows. For instance, in the financial years ended 1999 and 2000, the company’s dividend per share was $ 1.36 when it made net income of $ 650,100,000 and $ 861,200,000 respectively. However, in the two subsequent years when the company’s net income began to increase steady, the company has increased its dividends and paid their shareholders $ 1.48 and $ 1.70 respectively. Further, in the fiscal years 2003 and 2004, the company paid $ 1.76 as dividend to its shareholders. ...

I. Capital Structure Choices

Table 16 TI’s Statement of Current and Long-term Liabilities

Accounts Payable

Accrued Expenses

Deferred Revenues

Other Current Liabilities

Total Current Liabilities

Total Long Term Debt

Table 17 TI’s Statement of Shareholder’s Equity
Shareholder's Equity

Deferred Income Tax

Minority Interest

Other Long Term Liabilities

Total Long Term Liabilities

Total Liabilities

Common Shares Outstanding

Preferred Stock

Common Stock, Net

Additional Paid-in Capital

Retained Earnings

Treasury Stock

Other Shareholder's Equity

Shareholder's Equity

Total Liabilities & Shareholder's Equity

Figure 6 TI’s Debt and Equity Structure, 2007 to 2011

A. Capital Resources
Texas Instrument’s liquidity comes ...

1. Valuation ratio analysis
I have analyzed the health of Northwest Savings Bank (Ticker Symbol: NWBI), hereafter referred to as Northwest, with several relevant valuation ratio. These ratios are useful to determine whether its stock is currently undervalued or overvalued. These presents a kind of measure as to whether the stock is a potential buy or otherwise. We have also made comparisons between Northwest and its competitors, which includes PNC Bank (Ticker Symbol PNC) and Erie Bank (a division of CNB Bank, Ticker Symbol CCNE. Table 1.1 gives an overview of the financial data that we will be using for the ...

Linear technology

1. Linear Technologies Payout Policy
Linear Technologies is a technology company that designs and manufactures integrated circuits since 1981 to the computers market. The company took the approach of the Personal Computer development in the 1980's assuring a constant growth in all those years, having participation in computers, automotive and communications. The company starts listing on the NASDAQ stock exchange in 1986 when the company was available to the public investors to trade its common stocks. The company, thanks to the high availability of cash in its balance sheets, the company decided to start paying dividends to its shareholders, ...

Question 1

The most important issues confronting the FPL Group is whether to review their dividend policy. FPL has employed a high dividend policy over the years. The dividends pay-out has been increasing consistently in the last 47 years. 1993 was a best year for the group which saw it record the highest revenue. Management expected the company perform better in 1994. However, events took another turn. It was expected that Florida may allow Retail Wheeling which will significantly increase competition and change the entire competitive landscape in the industry. Therefore, management of FPL Group feel that the dividend pay-out of 2.58 for ...

Stock Valuation of Northwest Savings Bank

Many people think that investing is merely the act of buying something on low and selling it in high, which makes the investment seem very easy. But it is truly a difficult task as one needs to understand if making an investment is worth the price paid for the security and determine if the investment is expensive or cheap.
Investment is a very crucial task and should be done with great care. Making investment seems easy, but earning a good return on investment is difficult. Therefore, investment should be done after analyzing the company or stock or any instrument on which ...

Executive summary

Regan Inc. has been involved in the installation and manufacturing of commercial heating, ventilation and cooling (HVAC) units. This report uses dividend growth model to estimate the price of the stock. The report calculates the price of the stock of Regan Inc. after including the super growth period that the company would observe after advancement in technology. Price to earnings ratio of the company has been used and compared it with the industry to analyze how the investors think about the company’s future as well as the industry future. Return on equity has also been calculated if the ...

1. Company Profile

Thomas Cook Group Plc operates within the tourism and travel industry. The Company owns, operates and manages travel agencies, tour operators and car hire agencies, as well as owning their own aircraft fleet, cruise ships and resort properties. Thomas Cook is known as one of the largest travel companies in Europe.

2. Financial Analysis

The Thomas Cook Group has reported a robust set of results for the 2009 and 2010 financial years despite the uncertain economic environment and the significant adverse impact of a weak sterling pound. Thomas Cook‘s revenue for the year decreased by4% to £8,890million (5% deduction at constant currency).

...

Executive Summary

The case is regarding the recapitalization plan of Moe Miller, the new managing director at M&M Pizza. Miller is concerned about the stagnant share price of his company at around F$25 per share. Miller plans to issue F$500 million debt to repurchase shares.
He thinks that by repurchasing shares and changing the capital structure of his company would be beneficial to both the company as well as the shareholders. A higher proportion of capital to debt would result in lower cost of capital while share repurchase would result in higher share price due to higher dividend per ...

i) Calculating cost of equity using CAPM Model:
Capital Asset Pricing Model, often abbreviated as ‘CAPM’, is the most fundamental concept in the investment theory of present time. This is an equilibrium model that predicts the expected return on a stock, given the expected return on the market, the stock’s beta-coefficient and the risk free rate. Considered from the borrower point of view, this model is used to calculate the cost of equity for the company using the following formula:
Cost of Equity= RFR+ Beta(Equity Risk Premium)

Below is the detailed explanation of cost of equity calculated for Tim Hortons Inc:

Risk Free Rate: This refers to rates being offered by ...

- The stockholders’ equity section of the balance sheet gives an analysis of the several classes of shares held by shareholders and the company as at the end of that financial period, December 31, 2007. It gives details of the number of the various types of stock that are held and further goes on to give an analysis of the shares that have been issued and those that are outstanding. The statement of stockholders’ equity (exhibit 4) is almost similar to the stockholders’ equity section of the balance sheet, the only difference being that it is more detailed. It ...

Calculating cost of equity using Gorden Model:

In the first section of this paper, we will calculate the cost of equity of Nike Inc. using the Gorden Model as part of which, recent dividend payment will be used for estimating the cost of equity multiple. Followed are the calculations:
Value of Stock: Current Dividend(1+Growth Rate)/ (Required Rate- Growth Rate)
58.02= 0.62/( Required Rate- 0.1209)
= 13.15%

Here:

Growth Rate= Compounded Annual Growth Rate for past 5 years
= (0.62/0.35)0.20- 1
= 12.09%
Therefore, following Gorden Model, we found that the cost of equity for Nike Inc is 12.09%. However, because of the limitations of Gorden Model, ...

In the United States, Federation of Accounting Standard Bodies sets Generally Accepted Accounting Principles(GAAP) and outside United States,International Accounting Standards Board, sets the International Financial Reporting Standards(IFRS).
The approach carried out in IFRS and GAAP accounting standards is different. There are many accounting treatments for various transaction that differ under both of the accounting standards.

LIFO Inventory accounting is not allowed under IFRS. However, US Firms following GAAP accounting standards are required to dislcose LIFO reserve in the footnotes of financial statements.
LIFO Reserve = COGS LIFO - COGS FIFO

This adjustment enhances the comparability between US GAAP and IFRS firms.

Treatment of Interest and Dividends ...

Economic evaluation involves the business aspect monitoring and analysis in a company. This analysis is intended to carry out comprehensive auditing of the profit and/or loss making aspects of the company. The end result is expected to put the management of the company in the know that theirs is a profit or loss making venture. During such evaluation, several aspects are considered especially the financial aspects. The analysis is intended to identify the various needs of the company and try to propose practical solutions to the identified needs of the company. Such solutions may include a change in the structure of the ...

Abstract:

This report is intended to examine Ragan Inc’s current financial position and to identify any possible shortcomings and future threats. The report provides an analysis of the present stock price, dividend pay out ratio, Earnings per share, Price earning ratio and growth rate of the company and a comparison with industry averages. The method used to examine these indicators is stock valuation.

Company Brief:

Ragan Inc, formed by brother and sister Carrington and Genevieve Ragan, has been earning healthy profits for past nine years. The reason behind this was a unique technology being used by the company. The company is in the ...

Introduction

United Bank for Africa Plc (UBA) is one of the leading financial service institutions in Nigeria and West Africa, listed on the Nigerian Stock exchange, UBA is rapidly evolving into Pan African Service institution. Several ratios were applied on the financial data of the company and there were areas where the company performed well while in other areas there are valid concerns.

Financial Analysis

There are various ratios that showed that the company had improved in terms of profit in the period 2007 to 2008. The following ratios showed positive growth.
Net Profit Ratio: Net profit ratio increased from a figure ...

Introduction

At the heart of every successful corporative is the financing decisions that it adopts to ensure its financial stability. While companies are aiming at maximizing profits, the level of financial risk that they face ought to be minimized. This is usually achieved by making sure that the capital structure of the firm is optimal. In this regard, the dividend policies and decisions of a firm constitute the integral part of firm’s strategic financing decisions as it determines the division of earnings between shareholders and re-investment into the firm. The managers therefore have to formulate an optimal dividend policy that ...

1. According to Welch I (2005), WACC or amply the weighted average cost of capital is a rate to the firm that shows the cost of capital of running that firm. It is a calculation of a firm’s cost of capital showing how each category is weighted proportionally showing the categories percentage of the total capital of running the firm. In the calculation of the WACC, all capital sources like stock (common and preferred), debentures, bonds, and other sources including short and long-term debt are incorporated in the calculation of WACC. It should also be noted that WACC is a rate which ...

A)
In the article titled Corporate Policies of Republican Managers the authors tested the effect of personal political preferences of corporate managers on corporate policies. The authors specifically focused on the Republican managers who had 73% likelihood of identifying themselves as conservative, 24% chance of identifying as moderate, and only 3% chance of being liberal (Hutton, Danling and Kumar 1279). The study found that majority of the managers identifying themselves as politically more inclined towards the Republican also adopted conservative corporate policies. Consequently, the organizations that they led were characterized by low debt levels, low capital, low investment in ...

The primary issue in this case is related to pending litigation of the company and increasing competition in the tobacco industry that is likely to erode the market share of the company.

Why is UST Inc. considering a leveraged recapitalization after such a long history of conservative debt policy?

UST is considering a leverage capitalization in order to benefit from the tax shield associated with the debt financing. The increase in value along with existing enterprise value will be distributed amongst lower number of shareholders. Moreover, considering the past performance of UST, the company has a high cash generative capacity of the company’s business.
Evaluate the business risks of UST from the viewpoint of a ...

Part 2

The return will be computed using the yield to maturity formula. YTM captures all the relevant information in the valuation.
1)

Corporate bond

YTM = C+(F-P)/n(F+P/2
C is the coupon payment = 10.125% *1000 = 101.25
F is the face value = 1,000
P is the price = 879.625
N is the periods to maturity = 25
YTM = 101.25+(1,000-879.625)/25(1000+879.625)/2 = 11.6%

Government Bond

YTM = C+(F-P)/n(F+P/2
C is the coupon payment = 6.825% *1000 = 68.25
F is the face value = 1,000
P is the price = 975.42
N is the periods to maturity = 25
YTM = 68.25+(1, ...

Introduction

Most business enterprises are normally creations of ingenious business minds that make difficult financial decisions in order to take the business to the next level. In most occasions, only businesses with spectacular principles and competitive managers have an edge over competitors thereby staying in a market. An important aspect of a business is its mode of financing which can either be equity or debt business financing. This paper gives a comprehensive discussion on the advantages and disadvantages of both equity and debt as business financing strategies. Additionally, the paper gives a recommendation on the decision of AMSC to settle for equity financing.

Discussion

Advantages ...

Basic EPS=Net income-Preferred dividendWeighted average number of common shares outstanding

Jamba juice

(2012) Basic EPS=302 000-2 181 00014 139 888=-0,133.
(2013) Basic EPS=1 492 00016 793 235=0,089.

Starbucks

(2012) Basic EPS=1 384 700 000-900 000754 400 000=1,83.
(2013) Basic EPS=8 800 000-500 000749 300 000=0,011.

Percentage of Earnings Retained

PER=Earnings per Share-Annual dividend per ShareEarnings per Share=Net Income-DividendsNet income
Jamba juice
2012 PER=302-2181302=-6,22=-622%;
2013 PER=2080-5882080=0,72=72%.

Starbucks

2012 PER=1,83-0,721,83=0,61=61%;
2013 PER=0,01-0,890,01=-88=-8800%.

Dividend Payout

DP=Annual dividend per ShareEarnings per Share=DividendsNet Income
Jamba juice
2012 DP=2181302=7,22=722%;
2013 DP=5882080=0,28=28%.
...

A diversifiable risk refers to risk that an investor can eliminate if he held an efficient portfolio while a non-diversifiable risk refers to risk that still present in all adequately diversified portfolios. The investor, therefore, seeks to eliminate the diversifiable risk by adding more assets to the portfolio.

a) A substantial, unexpected increase in inflation is a non-diversifiable risk. This is because a substantial, unexpected increase in inflation will affect all assets that an investor can invest in. Therefore, the risk cannot be eliminated by adding more assets to the portfolio.
b) A major recession in the U.S is a non-diversifiable risk. This is ...

Introduction

United Bank for Africa is one of the fastest growing banks in the African continent. It was formed in 1961 in Nigeria and has its headquarters in Lagos. Universally, it has more than 6 million customers, and has 750 operational branches distributed in almost 20 countries in Africa. It prides of its existence in USA, France and UK. The bank was formed through a merger agreement with Standard Trust Bank in 2005. The bank is listed in Nigerian Stock Exchange. It became the holding company in 2011.
UBA uses the International Financial Accounting Standards (IFRS) as its major accounting ...

Q1 (a) Cash Flow Statement for the period 1 Jan 2015 to 31 December 2015

The missing/modified figures (as shown in yellow in the cash flow statement) are calculated as follows:
Employment income,
Keaton,
Given,
Gross Salary and Bonus= $120,000.00

Alyssa,

Given total salary and bonus=$64,800

Half paid in Aus and half in Singapore,

Thus her Salary and bonus paid in Singapore=$32,400

Employer’s CPF contribution,

Keaton- 37 % of 120,000=$44400
Alyssa- 20% of $32,400=$6480

Dividend and rental income

Dividend – Keaton-No dividend in 2015
Alyssa, $689 in 2015
Rental income
Keaton and Alyssa combined rental income for property in Singapore registered under joint tenancy agreement is $3,050 per month or $36600 for the year.

The portion of CPF and cash used for the housing installment is as mentioned below.

Total housing installment =$4099

Keaton:

Total monthly income=$10, ...

Sovereign wealth funds (SWF) are government funds that are established for investment purposes. These funds derive their finances mostly from the natural resources available in a country such as oil and gas. Merrill Lynch in a bid to assuage their financial shortcomings engaged various SWFs, namely Mizuho Corporate Bank and Korean Investment Corporation in an investment deal. Mandatory convertible preferred stock in the value of 6.6 billion was issued to these particular entities. In connection with these several other agreements were struck. The private placements were entitled to a 9% dividend per annum, a convertible premium of 17%, maturity ...

Introduction

Financial performance analysis is crucial for various stakeholders given the varying needs for performance information on various business aspects. In that respect, effective analysis entails evaluating performance over a period or comparing a company’s performance with industry peers. It also entails evaluating various performance areas using varying tools including financial ratios. In that view, the following is a report on Wyndham Worldwide Co. financial performance identifying the performance trend for the period beginning 2012 to 2014 and comparing its 2014 performance with that of the industry peers.

Analysis

Company Overview
Organization and history
Wyndham Worldwide Co. is a brand offering hospitality ...

Shareholder Report

Introduction
Citigroup, Inc. is a global financial services holding company providing products and services to the consumer banking sector. The financial institution is responsible for a portfolio of credit cards, corporate and investment banking, securities and other asset management. The foregoing is the shareholder report describing investment in Citigroup, Inc. shares, purchased 6 June, and sold 21 June 2013. The sum of USD $100,000 was invested in the company’s stock. The shareholder report takes into account portfolio factors affecting stock price*; including increase in net income and revenue expenses, as well as increase in net worth assets and ...

Dividends are payments made by a corporation to its shareholder members. Northboro Machine Tools Corporation has a good dividends growth. The dividends have become inconsistent over the years due to poor management of the firm. Both earnings and dividends have grown at a steady pace except for a certain period of time when recession and restructuring took toll. Despite this a dividends policy was recommended in order to solve the irregularity in dividends payment. The chief financial officer of Northboro Machine Tools Corporation was put to task in ensuring the dividends steadied up. The officer recommended to the board a dividend policy for implementation. Northboro ...

Five Below, Inc. is a retail chain belonging to the specialty retail industry which was incorporated in Pennsylvania, USA in 2002. It offers “dynamic, edited assortment of exciting products, all priced at $5 and below, including select brands and licensed merchandise” ("Overview | Fivebelow"). Five Below’s products range from sports equipments, styling merchandise, small décor items, craft works to candies and party items. It largely targets customers who are teenagers or pre-teens.
Since the company’s inception, it has expanded its business to almost all regions of the United States and has been successful in opening more than ...

Question 1

She can develop a financial plan for short term and long term duration that will act as a roadmap and a benchmark for performance evaluation.

She can develop financial recommendations based on deviance reports from financial projections.

Question 2
Debt financing increases the return on equity (ROE). From exhibit 9 it can be observed that the net income available for equity holders decreases as the Debt/Capital ratio increases. This is because interest expense is an allowable expenses for the purposes of taxation. Therefore, it offers a tax shield benefit reducing the amount of taxes paid the CPK and consequently, its profitability.
Cost of Equity = Risk free rate + β (Market return – risk free ...

Individual Tax Case Study

Facts
Age: 60
Marital status: Single
Bob recently retired from IBM and has $690,000 available from his 401(k) fund. He plans on using the money to open a used car business. The business will be located at 210 Ocean View Drive in Pensacola, Florida. The estimated taxable income from the business might be $300,000. Bob’s individual wealth including investments in stocks, bonds, and land is approximately $14,000,000. Last year, Bob reported a dividend income of $6,000 and an interest income of $20,000. The $14,000,000 comprises of land worth $9, ...

Answer 1)

Considering the current financially bearish trend in Pan Europa, the entity needs to work on multiple yet chain corporate activities to avoid hostile takeover. Below are some strategies, which can be used by the company:
i) To begin with, the company must channelize its investment in those projects that will assist the growth in the revenue figures and net income. It is also important for the company not take any additional debt and accept projects within their capital budget as the banks have already signaled red warning for unsustainable debt-equity position of the company with a rejection to grant any ...

AES is a leading independent supplier of electricity in the world with more than $33 billion in assets. Rob Venerus, the director of Corporate Analysis and Planning group was faced with a task of calculating the capital cost of the business. Many financial information and results were collected from subsidiaries in June 2003. The manager was obligated to develop a methodology to use the data to determine the costs of capital significantly in valuation and for capital budgeting. The group was created to solve the financial crisis, current and future strategic challenges.
The global economic instability had adverse effects such as ...

America is a developed nation that attracts large number of immigrants from other neighboring and developing states. Statistics indicate that a greater percentage of employees working in America are immigrants from other states who have entered into the country either legal or unlawfully. As a result of the high number of immigrants in the country, American has become a multicultural state as it embraces culture and racial diversity of citizens. A report released by Pew Research Centre affirms that there are about 8.3 unauthorized immigrants in American, and they form about 8.3 percent of the workforce (Passel &Vera 401). The American government allows ...

Introduction:

Our analysis of a company listed on US Stock Exchange is based on Starbucks Corporation, while for the purpose of comparison with the competitor within same industry, we shall be analyzing financial statements of Dunkin Donuts.

Starbucks Corporation is a leading marketer and retailer of coffee, having its outlets in 60 countries around the world. The stock of the company is listed on NASDAQ Stock Exchange with the tick symbol of ‘’SBUX’’. Apart from selling coffee, the company is also involved in tea, beverages and variety of fresh food items. Today, Starbucks is a leading and most recognized coffee brand in the ...

According to the Ford Motors balance sheet, it may seem that it indeed does have too much cash reserves. However, in deciding whether or not the company has too much cash, several factors will have to be considered. Companies hold cash for various reasons, chief among them the financing of routine transactions of the company, meeting covenants with lending institutions and other debtors, for speculation purposes and as a source of flexibility in the operations of the company.
Cash reserves held by Ford are high for the reason that the company intends to conduct a value enhancement plan. Such a move ...

Introduction

The Tata Group started in the mid 1990’s as an integration of freely coupled firms. This case analysis will major its focus on the leadership of the then-newly elected Tata Group CEO, Ratan Tata and his rise to prominence. It will further analyze some of the strategies he used in an attempt to strengthen the much needed interrelationship among the companies in the Tata Group of companies at a time when most of his critics were proposing for the complete dismantling of the alliance. Ratan Tata has been described as a very honest professional and unfailingly ethical man who never ...

Assessing the Goal of Sports Products, Inc.

a. What should the management of Sports Products, Inc., pursue as its overriding goal? Why?
Answer: Moyer, McGuigan, Rao, & Kretlow (2012, p. 6) had emphasized that the main objective of any organization must be to increase/maximize the wealth of its major stakeholders- mainly the investors who had invested their money in the firm. This improvement in their wealth will be reflected in current price (market price) of the organization’s stock. The price of the share would be a sign of size, risk and timing of the cash that would be generated over a certain time according to shareholders anticipations. ...

Kraft and Cadbury Merger / Acquisition Analysis

Kraft Foods is the 2nd largest beverage and Food Company based in United States of America and was formed on December 10, 1923. They started with manufacturing Ice cream and later expanded into a wide range of dairy products, enjoying presence in over 155 countries. Kraft is an independent corporation and is listed on the NYSE (New York Stock Exchange) with revenues of $40 billion (fiscal year 2009). Its planned strategy was to take over Cadbury which was one of its top competitors, so as to increase market share and to gain access to emerging economies. The aim was to ...

Merliah limited makes an offer to issue 10 million shares to the public at an offer price of $1.00 each share. These shares are to be paid up in 3 instalments, with the first payment of $0.5, the second payment of $0.4 and the balance in the third instalment. The first payment is to be made on application, the second payment on allotment while the last payment is to be paid as a first call two months after the close of the applications on 31st august 2011.
Applications have however been received for 14million shares, indicating an oversubscription by ...