Electronic Timing, Inc. Electronic Timing, Inc. (ETI), is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. ETI manufactures integrated circuits to capitalize on the complex mixed-signal design technology and has recently en- tered the market for frequency timing generators, or silicon timing devices, which provide the timing signals or “clocks” necessary to synchronize electronic systems. Its clock products originally were used in PC video graphics applications, but the market subsequently expanded to include motherboards, PC peripheral devices, and other digital consumer electronics, such as digital television boxes and game consoles. ETI also designs and markets custom application-specific integrated circuits (ASICs) for industrial customers. The ASIC’s design combines analog and digital, or mixed-signal, technology. In addition to Tom and Jessica, Nolan Pittman, who provided capital for the company, is the third primary owner. Each owns 25 percent of the 1 million shares outstanding. The company has several other individuals, including current employees, who own the remaining shares. Recently, the company designed a new computer mother- board. The company’s design is both more efficient and less expensive to manufacture, and the ETI design is expected to become standard in many personal computers. After investigating the possibility of manufacturing the new moth- erboard, ETI determined that the costs involved in building a new plant would be prohibitive. The owners also decided that they were unwilling to bring in another large outside owner. Instead, ETI sold the design to an outside firm. The sale of the motherboard design was completed for an aftertax payment of $30 million. QUESTIONS 1. Tom believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? How will it affect the value of the company? 2. Jessica believes the company should use the extra cash to pay off debt and upgrade and expand its existing manufacturing capability. How would Jessica’s proposals affect the company? 3. Nolan favors a share repurchase. He argues that a repurchase will increase the company’s P/E ratio, return on assets, and return on equity. Are his arguments correct? How will a share repurchase affect the value of the company? 4. Another option discussed by Tom, Jessica, and Nolan would be to begin a regular dividend payment to share- holders. How would you evaluate this proposal? into the dividend growth model, we get the following equation to calculate the price of a share of stock today: E 1 (1 2 b) 5. R One way to value a share of stock is the dividend growth, or growing perpetuity, model. Consider the following: 1 The dividend payout ratio is 1 minus b, where b is the “retention” or “plowback” ratio. So, the dividend next year will be the earnings next year, E , times 1 minus the retention ratio. The most commonly used equation to cal- culate the sustainable growth rate is the return on equity times the retention ratio. Substituting these relationships What are the implications of this result in terms of whether the company should pay a dividend or upgrade and expand its manufacturing capability? Explain. 6. Does the question of whether the company should pay a dividend depend on whether the company is organized as a corporation or an LLC?
This question was answered on: Dec 18, 2020
Buy this answer for only: $18.50
This attachment is locked
We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy (Deadline assured. Flexible pricing. TurnItIn Report provided)
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
About this QuestionSTATUS
Dec 18, 2020EXPERT
GET INSTANT HELP/h4>
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions:
- As a reference for in-depth understanding of the subject.
- As a source of ideas / reasoning for your own research (if properly referenced)
- For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
NEW ASSIGNMENT HELP?
Order New Solution. Quick Turnaround
Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.
WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN YOUR SET DEADLINE.