effective. Disadvantage : * 40% payout ratio will increase the cost of debt and put at risk it s investment opportunities * According to Asquith and Mullins (1986‚36) dividend signalling is more effective for lower risk firms‚ which Gainesboro is not. * Raise the capital to pay dividend by borrowing more will lead to an increase of debt to equity ratio and consequently financial risk. Reaction of various providers of capital : * Gainesboro’s shareholding is constituted at 26%
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Hampton Machine Tool Company 1. Why can’t a profitable firm like Hampton repay its loan on time and why does it need more bank financing? What major developments between November 1978 and August 1979 contributed to this situation? A/ Hampton Machine Tool Company was unable to repay its loan on time due to several factors. One of such factors is the fact that the stock repurchase‚ for which the loan was initially requested‚ was a major cash disbursement of $3 million. In the period between November
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HAMPTON MACHINE TOOL COMPANY About The Company Hampton Machine Tool was established in 1915 and has been manufacturing machine tools since its foundation. Hampton company’s customer base is made up primarily of aircraft manufacturers and automobile manufactures in the St. Louis area. It experienced record production and profitability during the years. Sales and profitability declined in the mid-1970s with the withdrawal from Vietnam War and the oil embargo. However‚ the company had stabilized the
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Case #1 CAINSBORO MACHINE TOOLS CORPORATE Question 1. What risks does the firm face? What is the limit of Exhibit 8 in terms of the risk analysis? From the article‚ there are two major risks the company face. First‚ the company’s financial condition is not very good. From 2003 to 2004‚ the gross profit declined from 314‚522 thousands to 257‚759 thousands. This leads the company suffer from an operating loss in 2004. For the first quarters of 2005‚ the board declared no dividend. This
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Executive Summary Hampton Machine Tool Company (HMTC) was founded in 1915 to produce machine tools. Machine tools manufacturing business is highly prone to economic fluctuations. Therefore‚ success of HMTC depends upon success of other related industries. The major customers of the company are aircraft manufacturers and automobile manufacturers. Sales of HTMC boomed during 1960s‚ decreased in the mid 70s and started to recover around 1978 due to the increase in demand of military aircrafts‚ a stable
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Hampton Machine Tool Company On September 14‚ 1979‚ Mr. Jerry Eckwood‚ vice president of the St. Louis National Bank was considering a loan request from a customer located in a nearby city. The company‚ Hampton Machine Too] Company‚ had requested renewal of an existing $1 million loan originally due to be repaid on September 30. In addition to the renewal of the existin- loan‚ Hampton was asking for an additional loan of $350‚000 for planned equipment purchases in October. Under the terms
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The Starnes-Brenner Machine Tool Company of Iowa City‚ Iowa‚ has a small one-man sales offi ce headed by Frank Rothe in La- tino‚ a major Latin American country. Frank has been in Latino for about 10 years and is retiring this year; his replacement is Bill Hunsaker‚ one of Starnes-Brenner’s top salespeople. Both will be in Latino for about eight months‚ during which time Frank will show Bill the ropes‚ introduce him to their principal customers‚ and‚ in general‚ prepare him to take
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STATEMENT OF THE PROBLEM Although this case presents several different issues to consider‚ the underlying problem is the correct implementation of Eastboro’s dividend policy. Eastboro was founded as a manufacturer of machine parts‚ and has traditionally paid a fairly substantial dividend. However‚ in recent years‚ the core focus of the company has shifted toward technology in the fields of computer-aided design and manufacturing‚ highlighted by its latest development‚ Artificial Workforce. This
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How might various providers of capital (shareholders and creditors) react if Gainesboro repurchased its shares? Should Gainesboro do so? Repurchasing shares or share buyback: – Open market repurchases (buy over time as other investors) – Tender offer (buy shares at a precise date) – Targeted repurchase (buy from major shareholder There are ways for shareholders to receive cash without being paid dividends. A firm can buy back some of its shares with the advantage being that most investors
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MOTION IN MACHINE TOOLS A machine tool is a machine for making components of a given shape‚ size and accuracy as per the requirements by removing material from the workpiece by using a cutting tool to operate upon the workpiece. Machine tools are capable of producing themselves therefore the machine tools are quite often referred to as mother machine. In the manufacturing processes‚ machine tools are the most versatile and almost any product can be produced with them. The machine tools should able
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