Webb Corporation was founded 20 years ago by its president, Bryan Webb. The company originally began as a mail-order company, but has grown rapidly in recent years, in large part due to its website. Because of the wide geographical disper- sion of the company’s customers, it currently employs a lock- box system with collection centers in San Francisco, St. Louis, Atlanta, and Boston. Holly Lennon, the company’s treasurer, has been exam- ining the current cash collection policies. On average, each lockbox center handles $193,000 in payments each day. The company’s current policy is to invest these payments in short- term marketable securities daily at the collection center banks. Every two weeks, the investment accounts are swept; the pro- ceeds are wire-transferred to Webb’s headquarters in Dallas to meet the company’s payroll. The investment accounts each earn .012 percent per day, and the wire transfers cost .20 per- cent of the amount transferred. Holly has been approached by Third National Bank, lo- cated just outside Dallas, about the possibility of setting up a concentration banking system for Webb Corp. Third National will accept each of the lockbox center’s daily payments via automated clearinghouse (ACH) transfers in lieu of wire trans- fers. The ACH-transferred funds will not be available for use for one day. Once cleared, the funds will be deposited in a short-term account, which will yield .012 percent per day. Each ACH transfer will cost $150. Bryan has asked Holly to determine which cash management system will be the best for the company. As her assistant, Holly has asked you to answer the following questions.

QUESTIONS
1.   What is Webb Corporation’s total net cash flow available from the current lockbox system to meet payroll?
2.   Under the terms outlined by Third National Bank, should the company proceed with the concentration banking system?
3.   What cost of ACH transfers would make the company indifferent between the two systems?

ELECTRONIC TIMING, INC. Electronic Timing. Inc., (ETI) is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. ETI manufactures integrated circuits to capitalize on the complex mixed-signal design technology and has recently entered the market for frequency timing generators, or silicon timing devices, which provide the timing signals or “clocks” necessary to synchronize electronic systems. Its clock products originally were used in PC video graphics applications, but the market subsequently expanded to include motherboards, PC peripheral devices, and other digital consumer electronics, such as digital television boxes and game consoles. ETI also designs and markets custom application-specific integrated circuits (ASICs) for industrial customers. The ASIC’s design combines analog and digital, or mixed-signal, technology. In addition to Tom and Jessica, Nolan Pittman, who provided capital for the company, is the third primary owner. Each owns 25 percent of the one million shares outstanding. The company has several other individuals, including current employees, who own the remaining shares. Recently, the company designed a new computer motherboard. The company’s design is both more efficient and less expensive to manufacture, and the ETI design is expected to become standard in many personal computers. After investigating the possibility of manufacturing the new motherboard, ETI determined that the costs involved in building a new plant would be prohibitive. The owners also decided that they were unwilling to bring in another large outside owner. Instead, ETI sold the design to an outside firm. The sale of the motherboard design was completed for an aftertax payment of $30 million.

Tom believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? How will it affect the value of the company?

Jessica believes that the company should use the extra cash to pay off debt and upgrade and expand its existing manufacturing capability. How would Jessica’s proposals affect the company?

Nolan is in favor of a share repurchase. He argues that a repurchase will increase the company’s PE ratio, return on assets, and return on equity. Are his arguments correct? How will a share repurchase affect the value of the company?

Another option discussed by Tom, Jessica, and Nolan would be to begin a regular dividend payment to shareholders. How would you evaluate this proposal?

One way to value a share of stock is the dividend growth, or growing perpetuity, model. Consider the following: The dividend payout ratio is one minus b, where b is the “retention” or “plowback” ratio. So, the dividend next year will be the earnings next year, E1, times one minus the retention ratio. The most commonly used equation to calculate the sustainable growth rate is the return on equity times the retention ratio. Substituting these relationships into the dividend growth model, we get the following equation to calculate the price of a share of stock today: Images What are the implications of this result in terms of whether the company should pay a dividend or upgrade and expand its manufacturing capability? Explain. Does the question of whether the company should pay a dividend depend on whether the company is organized as a corporation or an LLC?

Kelowna Microchips Inc. Kelowna Microchips Inc. (KMI) is a small company founded 15 years ago by electronics engineers Justin Langer and Suzanne Maher. KMI manufactures integrated circuits to capitalize on the complex mixed-signal design technology and has recently entered the market for frequency timing generators, or silicon timing devices, which provide the timing signals or “clocks” necessary to synchronize electronic systems. Its clock products originally were used in PC video graphics applications, but the market subsequently expanded to include motherboards, PC peripheral devices, and other digital consumer electronics, such as digital television boxes and game consoles. KMI also designs and markets custom application specific integrated circuits (ASICs) for industrial customers. The ASIC's design combines analog and digital or mixed-signal technology. In addition to Justin and Suzanne, Andrew Keegan, who provided capital for the company, is the third primary owner. Each owns 25 percent of the one million shares outstanding. The company has several other individuals, including current employees, who own the remaining shares. Recently, the company designed a new computer motherboard. The company's design is both more efficient and less expensive to manufacture, and the KMI design is expected to become standard in many personal computers. After investigating the possibility of manufacturing the new motherboard, KMI determined that the costs involved in building a new plant would be prohibitive. The owners also decided that they were unwilling to bring in another large outside owner. Instead, KMI sold the design to an outside firm. The sale of the motherboard design was completed for an after-tax payment of $30 million. QUESTIONS 1. Justin believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? How will it affect the value of the company? 2. Suzanne believes the company should use the extra cash to pay off debt and upgrade and expand its existing manufacturing capability. How would Suzanne's proposals affect the company? 3. Andrew favours a share repurchase. He argues that a repurchase will increase the company's P/E ratio, return on assets, and return on equity. Are his arguments correct? How will a share repurchase affect the value of the company? 4. Another option discussed by Justin, Suzanne, and Andrew would be to begin a regular dividend payment to shareholders. How would you evaluate this proposal? 5. One way to value a share of stock is the dividend growth, or growing perpetuity, model. Consider the following. The dividend payout ratio is 1 minus b, where b is the “retention” or “plowback” ratio. So, the dividend next year will be the earnings next year, E1, times 1 minus the retention ratio. The most commonly used equation to calculate the growth rate is the return on equity times the retention ratio. Substituting these relationships into the dividend growth model, we get the following equation to calculate the price of a share of stock today: Click here for a description of Equation: Mini Case Question 5. where Rs = Expected rate of return What are the implications of this result in terms of whether the company should pay a dividend or upgrade and expand its manufacturing capability? Explain.

Electronic Timing, Inc. (ETI), is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. ETI manufactures integrated circuits to capitalize on the complex mixed-signal design technology and has recently entered the market for frequency timing generators, or silicon timing devices, which provide the timing signals or “clocks” necessary to synchronize electronic systems. Its clock products originally were used in PC video graphics applications, but the market subsequently expanded to include motherboards, PC peripheral devices, and other digital consumer electronics, such as digital television boxes and game consoles. ETI also designs and markets custom application specific integrated circuits (ASICs) for industrial customers. The ASIC’s design combines analog and digital, or mixed-signal, technology. In addition to Tom and Jessica, Nolan Pittman, who provided capital for the company, is the third primary owner. Each owns 25 percent of the 1 million shares outstanding. The company has several other individuals, including current employees, who own the remaining shares.
Recently, the company designed a new computer motherboard. The company’s design is both more efficient and less expensive manufacture, and the ETI design is expected to become standard in many personal computers. After investigating the possibility of manufacturing the new motherboard, ETI determined that the costs involved in building the new plant would be prohibitive. The owners also decided that they were unwilling to bring in another large outside owner. Instead, ETI sold the design to an outside firm. The sale of the motherboard design was completed for an after tax payment of $30 million.

QUESTIONS:
1. Tom believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? How will it affect the value of the company?

2. Jessica believes the company should use the extra cash to pay off debt and upgrade and expand its existing manufacturing capability. How would Jessica’s proposals affect the company?

3. Nolan favors a share repurchase. He argues that a repurchase will increase the company’s P/E ratio, return on assets, and return on equity. Are his arguments correct? How will a share repurchase affect the value of the company?

4. Another option discussed by Tom, Jessica and Nolan would be to begin a regular dividend payment to shareholders. How would you evaluate this proposal?

5. One way to value a share of stock is the dividend growth, or growing perpetuity, model. Consider the following: The dividend payout ratio is 1 minus b, where b is the “retention” or “plowback” ratio. So, the dividend next year will be the earnings next year, ?1 , times 1 minus the retention ratio. The most commonly used equation to calculate the sustainable growth rate is the return on equity times the retention ratio. Substituting these relationships into the dividend growth model, we get the following equation to calculate the price of a share of stock today: ?0 = ?1(1−?) ??−???×?
What are the implications of this result in terms of whether the company should pay a dividend or upgrade and expand its manufacturing capability? Explain.

6. Does the question of whether the company should pay a dividend depend on whether the company is organized as a corporation or an LLC?

Integrated Waveguide Technologies (IWT) is a 6-year-old company founded by Hunt Jackson and David Smithfield to exploit metamaterial plasmonic technology to develop and manufacture miniature microwave frequency directional transmitters and receivers for use in mobile Internet and communications applications. IWT's technology, although highly advanced, is relatively inexpensive to implement, and its patented manufacturing techniques require little capital as compared to many electronics' fabrication ventures. Because of the low capital requirement, Jackson and Smithfield have been able to avoid issuing new stock and thus own all of the shares. Because of the explosion in demand for its mobile Internet applications, IWT must now access outside equity capital to fund its growth, and Jackson and Smithfield have decided to take the company public. Until now, Jackson and Smithfield have paid themselves reasonable salaries but routinely reinvested all after-tax earnings in the firm, so dividend policy has not been an issue. However, before talking with potential outside investors, they must decide on a dividend policy. Your new boss at the consulting firm Flick and Associates, which has been retained to prepare for its public offering and has asked you to address the following issues:

a.    (1) What is meant by the term "distribution policy"? How has the mix of dividend payouts and stock repurchases changed over time?

b.    Discuss the effects on distribution policy consistent with: (1) the signaling hypothesis (also called the information content hypothesis) and (2) the clientele effect.

c.    (1) Assume that IWT has completed its IPO and has a $112.5 million capital budget planned for the coming year. You have determined that its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution approach to determine IWT's total dollar distribution. Assume for now that the distribution is in the form of a dividend. Suppose IWT has 100 million shares of stock outstanding. What is the forecasted dividend payout ratio?What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million.

c.    (3) What are the advantages and disadvantages of the residual policy? (Hint: Don't neglect signaling and clientele effects.)

e.   Discuss the advantages and disadvantages of a firm repurchasing its own shares.

Integrated Waveguide Technologies (IWT) is a 6-year-old company founded by Hunt Jackson and David Smithfield to exploit metamaterial plasmonic technology to develop and manufacture miniature microwave frequency directional transmitters and receivers for use in mobile Internet and communications applications. IWT's technology, although highly advanced, is relatively inexpensive to implement, and its patented manufacturing techniques require little capital as compared to many electronics' fabrication ventures. Because of the low capital requirement, Jackson and Smithfield have been able to avoid issuing new stock and thus own all of the shares. Because of the explosion in demand for its mobile Internet applications, IWT must now access outside equity capital to fund its growth, and Jackson and Smithfield have decided to take the company public. Until now, Jackson and Smithfield have paid themselves reasonable salaries but routinely reinvested all after-tax earnings in the firm, so dividend policy has not been an issue. However, before talking with potential outside investors, they must decide on a dividend policy. Your new boss at the consulting firm Flick and Associates, which has been retained to prepare for its public offering and has asked you to address the following issues:

Assume that IWT has completed its IPO and has a $112.5 million capital budget planned for the coming year. You have determined that its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution approach to determine IWT's total dollar distribution. Assume for now that the distribution is in the form of a dividend. Suppose IWT has 100 million shares of stock outstanding. What is the forecasted dividend payout ratio?What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million.

STEPHENSON REAL ESTATE RECAPITALIZATION Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 years, and the shareholders are satisfied with the company’s management. Prior to founding Stephenson Real Estate, Robert was the founder and CEO of a failed alpaca farming operation. The resulting bankruptcy made him extremely averse to debt financing. As a result, the company is entirely equity financed, with 8 million shares of common stock outstanding. The stock currently trades at $37.80 per share. Stephenson is evaluating a plan to purchase a huge tract of land in the southeastern United States for $85 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson’s annual pretax earnings by $14.125 million in perpetuity. Jennifer Weyand, the company’s new CFO, has been put in charge of the project. Jennifer has determined that the company’s current cost of capital is 10.2 percent. She feels that the company would be more valuable if it included debt in its capital structure, so she is evaluating whether the company should issue debt to entirely finance the project. Based on some conversations with investment banks, she thinks that the company can issue bonds at par value with a 6 percent coupon rate. From her analysis, she also believes that a capital structure in the range of 70 percent equity/30 percent debt would be optimal. If the company goes beyond 30 percent debt, its bonds would carry a lower rating and a much higher coupon because the possibility of financial distress and the associated costs would rise sharply. Stephenson has a 23 percent corporate tax rate (state and federal).

1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain.

2. Suppose Stephenson decides to issue debt to finance the purchase. What will the market value of the Stephenson Real Estate Company be if the purchase is financed with debt?

3. What is the price per share of the firm’s stock? (Hint: Stock price per share = Total equity / # of outstanding shares)

In this assessment you are required to design a wireless campus network for Faber University. This assessment is group assessment and you may work in groups of upto 4 students. To design the wireless campus network for the university you are required to conduct a requirement analysis, propose a design of the network considering the university requirements, carry out a security analysis and propose a WLAN monitoring tool for monitoring the network in the future. The network needs to be designed with an industry tool for example packet tracer, GNS3 etc. The assessment will help in developing an understanding of communication in wireless networks, the security issues and the limitations and challenges. Faber University has recently been experiencing a decreasing level of enrolment. Faber was built in the early 1900s, and until ten years ago, was known as one of the finest centres for higher education on the eastern seaboard. In the last ten years, however, enrolment seemed to plateau and then slowly decline. Faber's Chancellor Jennings has hired a polling agency and formed an action committee composed of faculty, students, and administration to determine the causes of the university's decline in enrolment. The polling agency surveys the graduating seniors and reports that the emerging needs of students are not being met. The new generation of student that the university wants to attract is the technically elite who are known as early technology acceptors. Faber's rich history and, consequently, its old network architecture and lack of technical infrastructure, security and privacy, are its downfall in this new, technological environment. The university has different areas and buildings, the Administration department, the Athletic department, the Engineering department, the Biological Sciences department, the Liberal Arts department, the Student Union, Residential halls, Sports complex, Lake and Park. The campus is spread over large land and each building and open space is 200 meters apart. All the buildings have multiple floors and the current enrolment of students is 5000, there are 50 staff members and guests also visit the campus. As IT students your group has been assigned to design the wireless network. The following process needs to be followed to design a secure wireless campus network that meets the university requirements.

• Requirement Analysis

• Wireless Network Design

• Security Analysis

• Maintenance and Troubleshooting

Suppose that for all Miami University STA 261 students, the average distance that they live from campus is 12.2 miles with a standard deviation of 8.0 miles. A random sample of 49 Miami university STA 261 students was taken, and the sample average distance that they live from campus was calculated.

a. what is the shape of the population distribution? Briefly explain your response

b. What is the probability that a randomly selected MU STA 261 student lives at least 10 miles from campus?

c. What is the probability that the sample average will have a value of at least 10 miles?