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Gainesboro Machine Tools Corporation

FM-II Case assignment Report

Gainesboro Machine Tools Corporation

FM-II Case assignment Report

Submitted to:

Prof. A. Kanagaraj

Submitted to:

Prof. A. Kanagaraj

Name

Aditi Khanna

Animesh Srivastava

Arshita Kapoor

Mayank Sarkar

Radhika Koli

Roll No.

B13064

B13072

B13077

B13095

B13104

Name

Aditi Khanna

Animesh Srivastava

Arshita Kapoor

Mayank Sarkar

Radhika Koli

Roll No.

B13064

B13072

B13077

B13095

B13104

Contents and Work Distribution

S. No. | Particular | Done By |

1 | | Aditi Khanna |

2 | | Animesh Srivastava |

3 | | Arshita Kapoor |

4 | | Radhika Koli |

5 | | Mayank Sarkar |

Introduction

The Gainesboro Machine Tools Company is facing a dilemma about their dividend policy: whether to buy-back shares or to dole out dividends and in the case of the latter, what amount to consider. The company underwent a transition, from manufacturing industrial equipment to providing cutting edge solutions in computer-aided design and manufacturing (CAD/CAM). Hence, they are also looking into a $10 million expenditure on an image-advertising campaign to alter investor’s perceptions and bring them in line with the firm’s future aspirations.

Dividend Decision: Options

Zero-dividend payout

(+) Positives:

* This policy is in line with other high-growth, high-technology firms and Gainesboro, with its emphasis on advanced technologies and CAD/CAM was moving in that direction.

* This would signal to investors that they could hope to make capital gains on the share, but not little as far as dividends are concerned. A recent study found a reduction in number of firms paying dividends, from 66.5% to 20.8%.

* Moreover, this option will make it possible for Gainesboro to redistribute wealth to shareholders via a repurchase of stock.

* There would be a shift in the investor profile of Gainesboro from income oriented towards growth oriented shareholders....