Fiance decision making case analysis

Fiance decision making case analysis. Fiance decision making case analysis. Case 4B: Dividend Policy of Linear Technology

HBS Case 9-204-066.

In 1992, Linear Technology, a designer and manufacturer of analog semiconductors, initiated a dividend. The firm increased its dividend by approximately $0.01 per share each year thereafter. In fiscal year 2002, Linear experienced its first significant drop in sales since its 1986 initial public offering. Sales dropped by 47%, and profits fell by 54%. In the spring of 2003, CFO Paul Coghlan is deciding whether to recommend yet another increase in dividends to lift Linear’s payout ratio to 33.1%, high by the standards of technology firms.

Case Questions

You should provide a short report (not more than 5 pages, double-spaced) developed around the following questions:

  • Describe the payout policy of Linear Technology.
  • Why do firms pay dividends? Why has the rate of dividend initiations changed over time?
  • Should Linear return cash to its shareholders?
  • If Linear were to pay out its entire cash balance as a special dividend, what would be the effect on value? On the share price? On earnings? On earnings per share?
  • What if Linear repurchased shares instead?
  • What should Paul Coghlan recommend to the board?


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Fiance decision making case analysis

Fiance decision making case analysis

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