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10/28/2015
pare for its public offering,
of dividend policy and discuss
t to dividend payouts?
a. (1.) What is meant by the term “distribution policy”? How have dividend payouts versus stock repurchases changed over
nd David Smithfield to exploit
ctional transmitters and
ghly-advanced, is relatively
omparison to many electronics
to avoid issuing new
pplications, IWT must now
the company public. Until
fter-tax earnings in the
ors, they must decide on a
determined its present
on. Use the residual
distribution model approach to determine IWT’s total dollar distribution. Assume for now that the distribution is in the form of a
asted dividend per share?
n used to describe three
ean, and briefly describe
ct what we can tell
effects on dividend policy.
million?
0 million?
ill get dividend)
te doesn't get dividend)
ling and clientele effects.
er the residual payment
ing its own shares. Answer:
ments. Answer: See
ribution through a stock
Harcourt, Inc. items and derived items copyright © 2002 by Harcourt, Inc.
f. Suppose IWT has decided to distribute $50 million, which it presently is holding in very liquid short-term investments. IWT’s
no preferred stock). As
purchase. Now what is
IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the
f. (1.) Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic per share
f. (2.) Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value
Harcourt, Inc. items and derived items copyright © 2002 by Harcourt, Inc.
Here is the impact of repurchases versus dividends.
12/31 12/30 12/31
$2,578.8 $2,836.7 $2,836.7
0.0 73.2 0.0
$2,578.8 $2,909.9 $2,836.7
515.8 567.3 567.3
0.0 0.0 0.0
$2,063.1 $2,342.6 $2,269.4
100 100 100
2019
2020
Harcourt, Inc. items and derived items copyright © 2002 by Harcourt, Inc.
$0.67 $0.73
12/31 12/30 12/31
$2,578.8 $2,836.7 $2,836.7
0.0 73.2 0.0
$2,578.8 $2,909.9 $2,836.7
515.8 567.3 567.3
0.0 0.0 0.0
90.91 90.91 88.07
$22.69 $25.77 $25.77
2019
2020
ini Case Show
ee Chapter 14 Mini Case
dividends and stock
