...CASE STUDY 3 (15%) Case 3: Gainsboro Machine Tools Corp (GMTC) Read the following about GMTC (GMTC). The questions posed to you are: - 1. In theory, to fund an increased dividend payout or a stock buyback, a firm might invest less, borrow more, or issue more stock. Which of those three elements is Gainesboro’s management willing to vary, and which elements remain fixed as a matter of the company’s policy? 2. What happens to Gainesboro’s financing need and unused debt capacity if: a. no dividends are paid? b. a 20% payout is pursued? c. a 40% payout is pursued? d. a residual payout policy is pursued? Note that case Exhibit 8 presents an estimate of the amount of borrowing needed. Assume that maximum debt capacity is, as a matter of policy, 40% of the book value of equity. 3. How might Gainesboro’s various providers of capital, such as its stockholders and creditors, react if Gainesboro declares a dividend in 2005? What are the arguments for and against the zero payout, 40% payout, and residual payout policies? What should Ashley Swenson recommend to the board of directors with regard to the long-term dividend payout policy for Gainesboro Machine Tools Corporation? 4. How might various providers of capital, such as stockholders and creditors, react if Gainesboro repurchased its shares? Should Gainesboro do so? 5. Should Swenson recommend the corporate-image advertising campaign and corporate name change to the Gainesboro’s directors? Do the advertising and name change...
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...The University of Lethbridge Calgary Campus Faculty of Management Management 4430Y Financial Management Spring 2011 A.P. Palasvirta Office: Markin 4132, Lethbridge Phone: (403) 332-4582 e-mail: oz.palasvirta@uleth.ca Goal of Course Management 4430 is the capstone course in finance and will incorporate concepts you have learned in through your study of corporate, investments, and international. We will utilize the case methodology to focus our analysis. Cases describe a context in which a particular problem is found. Regardless of the particular characteristics of the problem, problem solving follows a general methodology: identification of the problem, describing the context of the problem, analysis of potential alternative solutions, the identification of the best solution, implementation of the best solution , and the creation of controls and contingency plans, if applicable. Text and Other Sources: E-book based on Case Studies in Finance, 6th ed., 2010, McGraw Hill, Toronto, ISBN Prerequisites Management 3412, Fundamentals of Investments Investments, Analysis & Management, 2nd Canadian Ed., 2005, Cleary & Jones, John Wiley & Sons Canada Ltd., Mississauga ISBN 0-470-83542-7 Management 3460, Corporate Finance Fundamentals of Corporate Finance, 6th Canadian Ed., 2007, Ross, Westerfield, Jordan, & Roberts, McGraw-Hill Ryerson, Toronto ISBN 13: 978-0-07-095910-1 A list of topics for which you should have working knowledge...
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...Deutsche Brauerei Teaching Note Synopsis and Objectives Suggested complementary cases regarding working-capital management and financial forecasting: “Kota Fibres,” (Case 10); “ServerVault,” (UVA-F-1304); and “Body Shop International 2001,” (Case 8). Cases regarding setting financial policy: “Gainesboro Machine Tools Corp.,” (Case 26); “Rosario Acero S.A.,” (UVA-F-1211). A newly-appointed director of a small German beer brewer must prepare to vote on three issues coming before the board of directors the next day: (1) approval of the financial plan for 2001, (2) declaration of the quarterly dividend, and (3) adoption of an incentive compensation plan for the marketing manager. The student’s task is to evaluate the past and prospective financial performance of the company and to critique its liberal credit and inventory policies. The objectives of the case are to: • Introduce and exercise tools and concepts of financial-statement analysis (including financial ratios, break-even analysis, and cash-flow statements). • Explore possible definitions of the “financial health” of a company. • Illustrate the linkage between operating policies and financial performance. • Consider the interdependence among corporate objectives regarding growth, dividends, and debt financing. • Explore the linkage between compensation incentives and financial performance. In this case, the marketing manager is motivated to build sales volume, which he accomplishes...
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