Beruflich Dokumente
Kultur Dokumente
10
0
Debt ratio (%) Debt/equity ratio Long term debt to Financial
(%) equity leverage
MARKET RATIOS
Gainesboro’s EPS increased
in year 2005 from a negative
earning in 2004. 5
-10
EPS
-15 Dividend cover
-20
-25
-30
-35
LIQUIDITY RATIOS
The liquidity ratios have been
decreasing for Gainesboro 2.5
which is a very alarming sign
for the company indicating
its inability to meet its 2
0
2003 2004 2005
ACTIVITY RATIOS
Decreasing asset turnover
ratio indicates the company’s 180
Sales volatility
Mean 756638
STD 51050.52
CV 0.06747
DOL
Z score
Weight 2003 2004
WC/TA 1.2 0.41 0.25
RE/TA 1.4 0.43 0.23
EBIT/TA 3.3 0.03 -0.21
MVE/TL 0.6 4.23 1.53
SALES / TA 1 1.21 1.18
4.94 2.00
SIMULATION
DIVIDEND DECISION
There are three main factors that may influence
a firm's dividend decision:
Free-cash flow
Dividend clienteles
Information signaling
THE FREE CASH FLOW THEORY OF DIVIDENDS
Uses:
Capital Expenditures -43.8 -50.4 -57.5 -66.2 -68.5 -78.8 -90.6
Change in working capital -19.5 -22.4 -25.8 -29.6 -34 -38.5 -44.3
Total -63.3 -72.8 -83.3 -95.8 -102.5 -117.3 -134.9
Excess Cash/ Borrowing Needs -22.7 -7.3 4.2 11.5 29.3 27.2 77.6
Dividend 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total excess cash/borrowing -22.7 -7.3 4.2 11.5 29.3 27.2 77.6
Dividend per share 0.0 0.0 0.0 0.0 0.0 0.0 0.0
40% DIVIDEND PAYOUT
40% of dividend payout 2005 2006 2007 2008 2009 2010 2011
Sales Growth Rate 15% 15% 15% 15% 15% 15% 15%
Net Income as % of sales 2.1% 4.0% 5.0% 5.5% 6.0% 5.6% 8.0%
Diveidend-Payout Ratio 40% 40% 40% 40% 40% 40% 40%
Uses:
Capital Expenditures -43.8 -50.4 -57.5 -66.2 -68.5 -78.8 -90.6
Change in working capital -19.5 -22.4 -25.8 -29.6 -34 -38.5 -44.3
Total -63.3 -72.8 -83.3 -95.8 -102.5 -117.3 -134.9
Excess Cash/ Borrowing Needs -22.7 -7.3 4.2 11.5 29.3 27.2 77.6
Dividend 7.2 16.0 23.0 29.1 36.5 39.2 64.0
Total excess cash/borrowing -29.9 -23.3 -18.8 -17.6 -7.2 -12.0 13.6
Dividend per share 0.4 0.8 1.3 1.6 2.0 2.1 3.5
RESIDUAL DIVIDEND PAYOUT
Residual dividend payout 2005 2006 2007 2008 2009 2010 2011
Sales Growth Rate 15% 15% 15% 15% 15% 15% 15%
Net Income as % of sales 2.1% 4.0% 5.0% 5.5% 6.0% 5.6% 8.0%
Diveidend-Payout Ratio 0% 0% 0% 0% 0% 0% 0%
Uses:
Capital Expenditures -43.8 -50.4 -57.5 -66.2 -68.5 -78.8 -90.6
Change in working capital -19.5 -22.4 -25.8 -29.6 -34 -38.5 -44.3
Total -63.3 -72.8 -83.3 -95.8 -102.5 -117.3 -134.9
Excess Cash/ Borrowing Needs -22.7 -7.3 4.2 11.5 29.3 27.2 77.6
Dividend 0.0 0.0 4.2 11.5 29.3 27.2 77.6
Total excess cash/borrowing -22.7 -7.3 0.0 0.0 0.0 0.0 0.0
Dividend per share 0.0 0.0 0.2 0.6 1.6 1.5 4.2
Cash flow projection of company
Projected excess cash
200
150
100
50
0
2005 2006 2007 2008 2009 2010 2011
-50
-100
0% Div 30% Div 40% Div
HOW THE VARIOUS PROVIDERS OF CAPITAL OF GAINESBORO, SUCH AS ITS
STOCKHOLDERS AND CREDITORS MAY REACT AT DIFFERENT LEVEL OF DIVIDEND
PAYOUT?
Affect of dividend policy on price
R2=0.035
SENSITIVITY
Sensitivity
Analysis
Intrinsic
gLValue gS =
25.81 25.81 9.5% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5%
6.0% 30.89 6.0% 29.00 29.62 30.25 30.89 31.54 32.21 32.88
6.5% 34.06 6.5% 31.97 32.65 33.35 34.06 34.79 35.52 36.27
7.0% 38.10 7.0% 35.74 36.51 37.30 38.10 38.92 39.75 40.59
7.5% 43.41 7.5% 40.70 41.59 42.49 43.41 44.35 45.30 46.27
8.0% 50.71 8.0% 47.52 48.56 49.63 50.71 51.81 52.93 54.08
8.5% 61.37 8.5% 57.48 58.76 60.05 61.37 62.72 64.09 65.48
9.0% 78.42 9.0% 73.41 75.05 76.72 78.42 80.15 81.92 83.71
9.5% 110.04 9.5% 102.95 105.27 107.64 110.04 112.49 114.99 117.53
10.0% 188.86 10.0% 176.58 180.60 184.69 188.86 193.10 197.41 201.81
10.5% 731.27 10.5% 683.32 699.02 715.00 731.27 747.84 764.71 781.88
REACTION
200
150
100
50
0
2005 2006 2007 2008 2009 2010 2011
-50
-100
0% Div 30% Div 40% Div
Repurchase stock by residual earnings year
after 2005
30.00
26.07 26.50
25.00
20.09
20.00
15.00
12.45
10.00
5.00
0.00
FCF DDM PAT P/E