On March 2, 2015, Best Buy Co. announced that it planned to repurchase up to $1...

On March 2, 2015, Best Buy Co. announced that it planned to repurchase up to $1 billion of its common shares. The company also announced on that day that an increase in its quarterly dividend from $0.19 to $0.23 per share, and a one-time special dividend of $0.51 per share. The special dividend resulted from a windfall legal settlement related to the manufacture of liquid crystal displays it had sold.

Which method of returning capital to investors (repurchases, regular dividends, special dividends) do you think is viewed by shareholders most favorably, and why?

Solutions

Expert Solution

Best B Co. sold manufacture of liquid crystal displays has a huge some of money within the company,investors may have different views to utilise this money that holding it as surplus. As keeping money won't either increse company value nor get into hands of shareholders.

Shareholder's View on (Repurchase,dividend)

In consider divdend and share repurchase as a factor affecting interest of stakeholder there are some aspects based on the interest of shareholders.

Current Source of income

Some investors may have this investment as only source of income so that kind of investor prefer to have a regular dividend.

-A special dividend is more advantageous in this case as more current income received.

- Share repurchasing as an option to selloff share to get a bulk amount of money.

Increasing Value of Investment

Ther are investors who required to increase in long term value of their investment that is share price by company investing in positive NPV projects or in this case a buyback increase holding power of remaining investors.

Increased future Dividend

After buying back shares number of shares in issued in stock market will reduce and effective dividend per share increases. This will be the interest of investor get more stake of ownership in company without buying new shares through repurchase.

Based on these theories there are mainly Three view points one is for Dividend,other for Repurchase and finally of Part Dividend plus repurchase.

In case of Dividend some prefer Special dividend of $0.51 as sum of money received. But there will be a concept at the same time that regular dividend to be paid and remaining money used to sahre buyback.

ekkarill92 answered 7 months ago

Next > < Previous

Related Solutions

On March 2, 2015, Best Buy co. announced that it planned to repurchase up to $1...

On March 2, 2015, Best Buy co. announced that it planned to repurchase up to $1 billion of its common shares. The company also announced on that day that an increase in its quarterly dividend from $0.19 to $0.23 per share, and a one-time special dividend of $0.51 per share. The special dividend resulted from a windfall legal settlement related to manufacture of liquid crystal displays it had sold. Which method of returning capital to investors (repurchases, regular dividends, special...

2. The stock repurchase is a decision by companies to buy their own shares in an...

2. The stock repurchase is a decision by companies to buy their own shares in an effort to help boost earnings per share and stock prices. A recent article published on WSJ (https://www.wsj.com/articles/companies-mull-suspending-ramping-up-share-buyback-plans-amid-coronavirus-11584477343) reported that finance chiefs are debating whether to make share repurchases or hold on to cash as stock prices fall on fears surrounding the coronavirus pandemic since the S&P 500 has plummeted about 25% from Feb. 18. Some companies appear to be taking advantage of the down...

Ivanhoe Co. purchased equipment on March 1, 2015, for $110,000 on account. The equipment had an...

Ivanhoe Co. purchased equipment on March 1, 2015, for $110,000 on account. The equipment had an estimated useful life of five years, with a residual value of $5,000. The equipment is disposed of on February 1, 2018. Ivanhoe Co. uses the diminishing-balance method of depreciation with a 20% rate and calculates depreciation for partial periods to the nearest month. The company has an August 31 year end. Record the acquisition of the equipment on March 1, 2015. (Credit account titles...

Express Co, purchased equipment on March 1, 2015, for $95,000 on the account. The equipment had...

Express Co, purchased equipment on March 1, 2015, for $95,000 on the account. The equipment had an estimated useful life of five years, with a residual value of $5,000. The equipment is disposed of on February 1, 2018. Express Co, use the diminishing-balance method of depreciation with a 20% rate and calculates depreciation for partial periods to the nearest month. The company has an August 31 year end. a) Record the acquisition of the equipment on March 1, 2015, b)Record...

In July 2015, health insurance company Anthem announced that it would buy rival insurer Cigna for...

In July 2015, health insurance company Anthem announced that it would buy rival insurer Cigna for $48.3 billion. What are your views about such major health insurance companies' mergers and acquisitions? Discuss two potential impacts of these mergers for hospitals whose primary source of patient care reimbursement are these health insurance companies in the United States.

1- Suppose receipts of $20,000 are moved from March to April. (March receipts are now planned...

1- Suppose receipts of $20,000 are moved from March to April. (March receipts are now planned at $94,999 while April receipts are planned at $110,210.) - What change would this have on the total season’s receipt plan? - What change would this have on the total season’s average stock and turnover?

2. On March 1, 2010, Jacoby Ltd., a Canadian company, entered into a contract to buy...

2. On March 1, 2010, Jacoby Ltd., a Canadian company, entered into a contract to buy supplies from Hornblower Co., a foreign company, for FC400,000. The contract requires Hornblower to deliver the supplies to Jacoby on July 15, 2010. Payment is required to be made in full upon delivery. On March 1, 2010, Jacoby entered into a forward contract with the bank to purchase FC400,000 on July 15, 2010. As promised, Hornblower delivered the goods on July 15th and payment...

Use this Fact Set for Questions 2-7: Three retailing giants, Best Buy Co., Inc. (NYSE: BBY),...

Use this Fact Set for Questions 2-7: Three retailing giants, Best Buy Co., Inc. (NYSE: BBY), Amazon.com, Inc., (NASDAQ: AMZN), and Target Corporation (NYSE: TGT) each use a different inventory costing method. Best Buy uses weighted-average cost, Amazon uses FIFO, and Target uses LIFO. As you will see from the hypothetical example below, the use of a different inventory costing method will lead to differences in income statements and balance sheets. Best Buy, Amazon and Target sell a popular T-shirt...

The 2018 annual report of Best Buy Co., Inc., reported profitable operations for the

The 2018 annual report of Best Buy Co., Inc., reported profitable operations for the most recent six years. However, the company suffered a net loss in 2012. Best Buy reported the following for the twelve months ended March 3, 2012: The calculation of diluted earnings per share assumes the conversion of the company’s previously outstanding convertible debentures due in 2027 into 8.8 million shares common stock . . . and adds back the related aftertax interest expense of $1.5. ....

On March 1, 2015, Bowan Corporation issued 6% bonds dated February 1, 2015, the face amount...

On March 1, 2015, Bowan Corporation issued 6% bonds dated February 1, 2015, the face amount of $700,000. The bonds were sold for the present value of the bonds on March1, 2015 plus one-month accrued interest. The bonds mature on January 31, 2018. Interest is paid semiannually on July 31 and January 31. Bowan's fiscal year ends on December 31 each year. The effective interest rate is 8%. Required: a. Determine the present value the bonds on...

Subjects