Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
Question
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Chapter 14, Problem 6CC
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 discuss: Whether the dividend depends on the company organized as a corporation or an LLC.

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