Warren Buffert

Corporate payout policy

Group 3 – 3

By: LI, Xiao Xiao n7354029

Zhang, Yu Jing n7294557

Chen, Xiao Liang n7295839

Wang, Zhen n7334397

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Abstract

The aim of this report is to find out what dividend policy can suit for company by analysis different kinds of dividend policy including zero payout policy, 20 percent payout policy, 40 percent payout policy, residual payout policy and share repurchase policy. Also show recommendations for Gainesboro as what kind of dividend payment policy should they processed.

Table of contents

1.0 Introduction 3

2.0 Gainesboro’s management 3

3.0 Gainesboro’s financing needs and unused debt capacity 4

4.0 React for declare dividend 6

5.0 React for share repurchase

6.0 Recommendation and conclusion7

Reference8

Appendix I Consolidated Balance Sheets 9

Appendix II –Dividend payout

Appendix III – Unused debt capacity with no dividend payout

Appendix Ⅳ – Unused debt capacity with 20% dividend payout

Appendix Ⅴ – Unused debt capacity with 40% dividend payout

Appendix Ⅵ– Unused debt capacity residual dividend policy

Appendix Ⅶ– D/E ratio change with different dividend payout rate

List of Table

Table 3.0: D/E ratio

1.0 Introduction

Gainesboro Corporation is a company recently transitioned into computer-aided design and computer-aided manufacturing (CAD/CAM) equipment manufacturer. 

This report aims to analyze the three methods of Gainesboro to find an increase in dividend payout or a stock buyback. It then examines Gainesboro’s financing needs and unused debt capacity which affected by different dividend payouts. Finally, reactions for declare dividend and share repurchase. Recommendations are then be formulated based on the key factor analyzed.

2.0 Gainesboro’s management

Dividend payouts are one of the two usual options open to an investor when it comes to dividends generated on investment holdings (Price et al, 2012). This option often allows the...