As you prepare this case for tomorrow, please consider the questions below: (Note: this case doesn’t require much Excel work, so you only need to submit your writeup and don’t need to upload your...

1 answer below »
As you prepare this case for tomorrow, please consider the questions below:
(Note: this case doesn’t require much Excel work, so you only need to submit your writeup and
don’t need to upload your spreadsheet)
1. Describe the dividend payout policy at Linear Technology (both in terms of what their
dividends per share have been, and also what their payout ratio [defined as the percentage of net
income paid out in dividends] has been). Which has been more stable over time, the dividends
per share, or the payout ratio?
2. Describe the share repurchase policy at Linear. What are some reasons that Linear feels
share repurchases are an important strategy?
3. What are Linear's CapEx financing needs (in relation to their net income numbers and cash
balance)? Does the dividend potentially limit what they can spend on CapEx, based on the last
few years? Since they have a lot of cash, do you think they should pay some of this out to the
shareholders as a special dividend in your opinion?
4. Consider a hypothetical using the 2002 numbers in Exhibit 2: if Linear paid out their entire
cash balance as a special dividend at the beginning of 2002, what would be the effect on the
value of the firm? On the share price? On earnings and EPS? What if they used all of the cash
balance to do a share repurchase at the beginning of 2002 instead? (You can assume that Linear
earns a 3.35% interest rate on their cash balance for your calculations.).
5. If you were Paul Coghlan, what is your recommendation to the board?
Answered 1 days AfterSep 29, 2022

Answer To: As you prepare this case for tomorrow, please consider the questions below: (Note: this case doesn’t...

Prince answered on Oct 01 2022
57 Votes
Q1
Linear Technology has been increasing their annual dividend payment to stockholders for a number of years. Over the duration of the corporate history, the dividend payout has changed a little, but it has largely remained in the 30%–40% area. Both the payout ratio and the per-share dividend have been quite steady over the history
of the company, although the per-share dividend has been more consistent.
Since the company's founding, Linear Technology does have a history of repaying its stockholders with yearly dividend increases. The Linear Technology of companies is represented on significant stock markets. Over the course of its existence, the company's payout ratio, which gauges the percentage of net income delivered to shareholders as dividends, has experienced a few minor changes.
The dividend payout has often ranged from 30% to 40%. While the dividend payout has been fairly unpredictable, the per-share dividend or the amount of money paid to each owner, has stayed very constant. Each shareholder's part of the overall payout is represented by the dividend per share. The per-share dividend and the payment ratio, however, have remained fairly stable this year.
Due to the company's solid financial performance, Linear Technology was able to maintain its dividend payouts at the same pace. Linear Technology has a long history of profitability, which has allowed it to consistently pay dividends to stockholders even during economic downturns. This has allowed the company to prosper over the years. The success of an organisation can be partly attributable to the priority it gives to both innovative products and client satisfaction.
Because of its track record of developing ground-breaking services and products that address the unique demands of its customers, Linear Technology is generally regarded as a leader in the technology sector. These products and services are customised to meet the needs of the clients of the business. As a result, the business has indeed been able to flourish and thrive within its sector.
The reliability of Linear Technology's dividend payments can be attributed in part to the company's prudent financial management. Dividend payments to Linear Technology shareholders have never stopped. Due to its sound financial position, which includes a low amount of debt and a balanced balance sheet, Linear Technology does have a solid reputation.
This has allowed the company to maintain sound financial standing. Due to this, the business has continued to pay dividends consistently even during times of turbulence in the economy. Since the beginning of the business, Linear Technology has paid dividends consistently. This is directly attributable to the company's outstanding financial performance and careful handling of its financial affairs.
Q2
To make sure it has an adequate number of shares in its common stock among its possession, Linear frequently participates in stock buybacks, either publicly and privately. Numerous variables affect both the amount of cash on hand and the exact timing of repurchases. These criteria also determine the amount of money that is available. Examples of these factors include liquidity, stock price, and market conditions. In order to give its shareholders value back, Linear has several alternatives, including the adaptable and successful...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here