The president of Semiconductor Manufacturing International Corporation made this statement in the company’s annual report: “United’s primary goal is to increase the value of the common stockholders’ equity over time.” Later in the report, the following announcements were made: a. The company contributed $1.5 million to the symphony orchestra in San Francisco, where it is headquartered. b. The company is increasing its relative use of debt. Whereas assets were formerly financed with 35 percent debt and 65 per-cent equity, henceforth the financing mix will be 50–50. c. The company has been paying out half of its earnings as dividends and retaining the other half. Henceforth, it will pay out only 30 percent as dividends. Discuss how Semiconductor Manufacturing International Corporation stockholders, customers, and the labor force will react to each of these actions and then explain how each action might affect United’s stock price.
The president of Semiconductor Manufacturing International Corporation made this statement in the company’s annual report: “United’s primary goal is to increase the value of the common
a. The company contributed $1.5 million to the symphony orchestra in San Francisco, where it is headquartered.
b. The company is increasing its relative use of debt. Whereas assets were formerly financed with 35 percent debt and 65 per-cent equity, henceforth the financing mix will be 50–50.
c. The company has been paying out half of its earnings as dividends and retaining the other half. Henceforth, it will pay out only 30 percent as dividends.
Discuss how Semiconductor Manufacturing International Corporation stockholders, customers, and the labor force will react to each of these actions and then explain how each action might affect United’s stock price.
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