Electronic Timing Case Study
1. Electronic Timing should be extremely careful in deciding to use the extra cash flow to pay a special one-time dividend because this could lead to the stock decreasing in price. If the company decides to do this I believe the value of Electronic Timing would decrease. I believe this because there will be a transfer of value between the company and its shareholders. 2. Jessica’s proposal would help with the growth of the company. By deciding “not” to use the extra cash to pay dividends Electronic Timing should plan on growing its manufacturing capabilities. 3. I don’t believe Nolan is correct in thinking it will increase the company’s P/E ratio, return on assets, and return on equity. A share repurchase would decrease the stock of a shareholder, where you would want to keep it stable. If Electronic Timing goes ahead with a share repurchase the P/E ratio will increase until the market corrects it. 4. When deciding if Electronic Timing plans to begin a regular dividend payment to shareholder Tom, Jessica, and Nolan need to answer whether or not they feel like the company will be able to commitment to paying out regular dividends. This needs to be answered first, because the paying out of regular dividends leads shareholders to believe it is making a commitment and also represents stability of the company. They also need to make sure that the company’s strategies are aligned so they can commit to paying out regular dividends. In addition, they need to research what method their shareholders prefer to gain value in the company. 5. Electronic Timing has to make tradeoffs when deciding to expand, which may mean having lower dividends in return for a higher growth rate. Keep in mind expanding today will help with higher dividends down the road. In addition, the company needs to make sure they keep most of their earnings to help with upgrading and or expanding. This will also help the company reach its targeted rate of return. 6. I don’t believe