Mod D
CORPORATE FINANCE
Professor HERB MEIBERGER
Submied by : Anjana Pandathil
This case presents the decision to be made by the company Linear Technology
regarding its dividend policy. They had to decide if the company should increase
the dividend payments to the shareholders or if they should invest in share
repurchases or if they should consider a combina!on of both – 50% dividend
payment and the rest buying back shares. A choice had to be made between these
op!ons for the beerment of the company and also maximiza!on of the
shareholder’s value.
Key Issues
The company faced a number of issues. Linear Technology was carrying an
excess of $ 1.5 billion in the last quarter of 2003. This was a key issue as a
company must hold only just the right amount of cash which is required for its
expenses , interest payments and for capital expenditures . It is acceptable if the
company holds a lile more than the basic requirement in case of sudden
