Case study: E incorporation is a small company founded by Person T and Person J. They are the manufacturers of integral circuits. Recently, the company decided to include motherboards, PC peripheral devices, and other digital consumer electronics. In addition to T and J, Person N who provided the capital of the company, became the third owner of the company. Each of them owns 25% of 1 million shares outstanding. The employees of the company and other investors are part of the shareholders, and own the balance shares. The company designed the computer motherboards, which are more effective and less expensive to manufacture; but the cost incurred to design is very high and the owners are unwilling to bring other owners. The sale of the ETI was mainly to the outsiders; at the rate of after-tax payment of value of $30 million. Characters in the case: Company E: Manufacturers of integral circuits Person T: The electronic engineer and founder of the company E Person J: The electronic engineer and founder of the company E Person N: The new owner of the Company E To determine: The impacts of using the extra cash dividend to pay off debts and as how it affects the value of the company.

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Chapter 14, Problem 2CC

Summary Introduction

Case study:

E incorporation is a small company founded by Person T and Person J. They are the manufacturers of integral circuits. Recently, the company decided to include motherboards, PC peripheral devices, and other digital consumer electronics.

In addition to T and J, Person N who provided the capital of the company, became the third owner of the company. Each of them owns 25% of 1 million shares outstanding. The employees of the company and other investors are part of the shareholders, and own the balance shares.

The company designed the computer motherboards, which are more effective and less expensive to manufacture; but the cost incurred to design is very high and the owners are unwilling to bring other owners. The sale of the ETI was mainly to the outsiders; at the rate of after-tax payment of value of $30 million.

Characters in the case:

Company E: Manufacturers of integral circuits

Person T: The electronic engineer and founder of the company E

Person J: The electronic engineer and founder of the company E

Person N: The new owner of the Company E

To determine: The impacts of using the extra cash dividend to pay off debts and as how it affects the value of the company.

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