Case study: E incorporation is a small company founded by Person T and Person J. They are the manufacturers of integral circuits to capitalize on the complex mixed-signal design technology. 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 primary owner. 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 remaining shares. The company designed the new 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. Thus, ETI sold the design to an outside firm at the rate of after-tax payment 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 regular dividend is suitable to tackle the above situation.

Question

Want to see the full answer?

Answer 1

Question

Chapter 17, Problem 4M

Summary Introduction

Case study:

E incorporation is a small company founded by Person T and Person J. They are the manufacturers of integral circuits to capitalize on the complex mixed-signal design technology. 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 primary owner. 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 remaining shares.

The company designed the new 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. Thus, ETI sold the design to an outside firm at the rate of after-tax payment 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 regular dividend is suitable to tackle the above situation.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Problem 4. Consider the following balance sheet for Watchover Savings Incorporated (in millions): Assets Liabilities and Equity Floating-rate mortgages (currently 12% per annum) Now deposits (currently 8% per $ 82 annum) $ 116 30-year fixed-rate loans (currently 9% per annum) 5-year time deposits (currently 8% per 101 annum) 29 Equity 38 $ 183 Total $ 183 Total a. What is Watchover's expected net interest income at year-end? b. What will be the net interest income at year-end if interest rates rise by 3 percent? c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 3 percent increase in interest rates?

You are given the following information for Frankenson Pizza Company: Sales = $72,000; Costs = $32,300; Addition to retained earnings = $6,500; Dividends paid = $2,220; Interest expense = $5,200; Tax rate = 23 percent. Calculate the depreciation expense. Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.

Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities. Assume face value is $100. Bond Coupon (%) Price (%) 2 4 8 81.62 98.39 133.42 a. What is the yield to maturity of each bond? b. What is the duration of each bond? Complete this question by entering your answers in the tabs below. Required A Required B What is the yield to maturity of each bond? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Bond Coupon (%) YTM 2 % 4 8 % % Required A Required R Required B What is the duration of each bond? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Bond Coupon (%) Duration 2 years 4 years 8 years