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 are not taxed as heavily on shares sold as they are on
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Gainesboro Machine Tools Corporation Teaching Note Synopsis and Objectives In mid September 2005‚ Ashley Swenson‚ the chief financial officer (CFO) of a large computer-aided design and computer-aided manufacturing (CAD/CAM) equipment manufacturer needed to decide whether to pay out dividends to the firm’s shareholders‚ or to repurchase stock. If Swenson chose to pay out dividends‚ she would have to also decide upon the magnitude of the payout. A subsidiary question is whether the firm should
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Journal of Financial COMMON Economics 9 (1981) 139-183. STOCK REPURCHASES North-Holland Publishing Company AND MARKET SIGNALLING An Empirical Study* Theo VERMAELEN lJ/niversity of British Columbia‚ Vancouver‚ BC‚ Canada V6T 2 W5 Received January 1980‚ final version received January 1981 This paper examines the pricing behavior of securities of firms which repurchase their own shares. The results are consistent with a market in which investors price securities
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REPURCHASE OF SHARES In the past two decades‚ major U.S. corporations have increasingly repurchased significant amounts of their own common shares. The reasons for this development and its implications for the theory of share valuation and public policy‚ however‚ have been subject to numerous‚ and often conflicting‚ interpretations. The repurchase of shares is not legal under all codes of law; but in the countries where it is legal‚ it opens up a variety of opportunities for gains for the stockholders
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Share repurchases and the protection of shareholders* KATHLEEN VAN DER LINDE** 1 Introduction From a creditor’s perspective there is not much difference between the payment of a dividend in respect of a share and a payment for the acquisition or repurchase of that share. However‚ from the point of view of the shareholder a dividend is a return on capital while a repurchase is a return of capital to the vendor shareholder. Share repurchases change the structure of the company’s share capital
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GAINESBORO MACHINE TOOLS CORPORATION CASE STUDY STUDY QUESTIONS FOR THURSDAY 21 AUGUST 2014 This is a fictious case based on real world situations. Although the primary focus is the dividend policy decision the situation of the company has been influenced by its corporate strategy and this case offers the opportunity to also consider the behavioural‚ management‚ and general business issues. The case questions are: As a background to the dividend policy decision briefly evaluate the corporate
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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
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proposition is to repurchase common stocks‚ with bills being paid by issuing bond and excess cash. The pros and cons for Hill Country to repurchase stocks by issuing bonds Share repurchase is a program by which a company buys back its own shares from the marketplace‚ reducing the number of outstanding shares. Because a share repurchase reduces the number of shares outstanding‚ it increases earnings per share and tends to elevate the market value of the remaining shares. Share repurchase is usually an
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recapitalisation include an increase in the share price & cost of capital and reduced earnings per share. In essence‚ the potential benefits of a $3 billion bond issue are outweighed by the costs. Other potential impacts were considered and it was expected that the debt issue would lead to an increased agency cost of debt while voting control was not expected to change. The signal of a leveraged recapitalisation through a share repurchase should result in an increased share price and similarly‚ a recapitalisation
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Intel Corporation‚ 1992 Case Study Describe the characteristics of the industry in which Intel operates. How is Intel positioned in the industry? Intel operates in an industry‚ which is comprised of products involving high research and development costs‚ continuous product improvement and new innovations. The companies in the industry are having high economies of scale and are knowledge based. It helps both the service and manufacturing sectors in the growth process. Intel is positioned
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