financial analysis amp valuation 4
As you do the write up for the Rockboro Case, here are some questions to guide your letter.
- What are the problems here, and what do you recommend?
- What are the implications of different payout levels for Rockboro’s capital structure and unused debt capacity?
- What is the nature of the dividend decision that Larson must make? What are the pros and cons of the alternative positions? (Or alternatively, why pay any dividends?) How will Rockboro’s various providers of capital, such as its stockholders and bankers, react to a declaration of no dividend? What about the announcement of a 40% payout? How would they react to a residual payout?
- What risks does the firm face?
- What is the nature of the share-repurchase decision that Larson must make? How would this affect the dividend decision?
- Does the stock market appear to reward high-dividend payout? What about low-dividend payout? Does it matter what type of investor owns the shares? What is the impact on the share price of the dividend policy?
- What should Larson (you) recommend?
We obviously will spend today going into more depth on all of these issues so that you understand how to frame your recommendation.
