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The document presents financial information for a company considering different options for distributing $576 billion in cash to shareholders. It discusses distributing the money through dividends or share repurchases. Calculations show that for a client owning 1 million shares, the cash received before and after taxes is the same regardless of whether the company distributes the money through dividends or repurchases shares. The proportion of the client's shares is also unaffected by either option.

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77 views13 pages

Presentation 1

The document presents financial information for a company considering different options for distributing $576 billion in cash to shareholders. It discusses distributing the money through dividends or share repurchases. Calculations show that for a client owning 1 million shares, the cash received before and after taxes is the same regardless of whether the company distributes the money through dividends or repurchases shares. The proportion of the client's shares is also unaffected by either option.

Uploaded by

subhas99311
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

FINANCIAL MANAGEMENT

PRESENTATION

Presented by
Gavav Geetha Madhuri
Priyaparna Mjaumdar
Sandeep Kumar
A Srikant
Kartheek Siddabatthula
Manish Kumar Pursty
VishwaPrasad Attada
Subhas Kar
SYNOPSIS
• Client owns – 1 million share.
• Purchased on Feb 28,2003.
• Company is holding large amount of
cash.
• Planning to disburse half of the
cash among share holders.
– Dividend payout.
– Share repurchase.
• After share repurchase client has
CASE

same proportion of share as


before it.
• Dividends and capital gains are
taxed at 15%.

• Cash with the company
$1,152,000,000.
DATA

– Amount for payout = $576,000,000


• No of shares outstanding
448,837,000.
• Recent price per share - $164.70.

If half of the cash has to be
distributed
$576,000,000
CALCULATIONS Net Income Applicable to Common Shareholders = $1,152,000,000

Dividend per share (shares outstanding = 448,837,000 ) $1.2833167

Cash received by client before taxes under dividends $1,283,316.66

Cash received by client after taxes under dividends $1,090,819.16

No of shares that could be repurchased @ $164.70 3,497,267.76

%age of shares that could be repurchased 0.0078 %

No of shares client has to sell 7,791.84

Proportion of client's share before repurchase 0.0022%

Proportion of client's share after repurchase 0.0022%

Cash flows under repurchase option BEFORE TAX


$1,283,316.66

Cash flows under repurchase option AFTER TAX


$1,090,819.16
After dividend Payout price of share 163.42

Before TAX
Cash flows for client after dividend payout if he sells all the shares $163,420,000
CALCULATIONS

After TAX
Cash flows for client after dividend payout if he sells all the shares $138,907,000

Shares he is holding now 992,208

After share repurchase

Before TAX
Cash flows for client if he sells all the shares $162,146,657

After TAX
Cash flows for client if he sells all the shares $137,824,658
CONCLUSION

• In a perfect capital market, when a dividend is paid, the


share price drops by the amount of the dividend
when the stock begins to trade ex dividend.

• An open market share repurchase has no effect on the


stock price and the stock price is the same the cum
dividend price if a dividend were paid instead.
SYNOPSIS

• Analyzing change in capital


structure.
– $1bn to new stock to repurchase
new debt.
CASE

– $1bn to new debt to repurchase


new stock.

• No of share outstanding -
1,638,821,000.
DATA

• Current stock price – $37.49.


• Long term debt - $8,662,000,000.
• Latest yield – 1.694.
•
•
• Planning to expand its production of
SYNOPSIS
their gas-electric hybrid drive systems
to US.
• Investing $1.5 billion in a new plant
• Expected 10 year life.
• The anticipated free cash flow is $220
million the first year of operations .
• Growth by 10% for 2nd and 3rd years and
by 5% for the remaining seven years.
CASE
CALCULATIONS

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