Case 4A: Palm IPO or Case 4B: Dividend Policy of Linear Technology

For this Case 4A or 4B Assignment, you will review and select one of the case studies to investigate further. Once you have made your selection, you will examine the case to determine the mis-pricing of the IPO or to recommend another increase in dividend payouts.

Course Text

·       Shefrin, H. (2005). Behavioral corporate finance. McGraw-Hill/Irwin.

o   Chapter 5: Palm IPO (p. 90) (PICTURES OF BOOK PAGES ATTACHED)

Review this mini-case study for this case study Assignment and think about if you want to use this as your focus for this Assignment. Case Study

·       Baker, M. P. & Berkley Wagonfeld, A. (2003). Dividend Policy of Linear Technology, HBS Case 9-204-066. Retrieved from Harvard Business Publishing https://cb.hbsp.harvard.edu/cbmp/access/37227892 (ATTACHED)

For this activity:

1.    Review the mini-case study, Palm IPO found in this Assignmentâ€s Learning Materials and the abstract about Dividend Policy of Linear Technology presented in the Coursepack from the Harvard Business School Publishing website. (Note: See the downloading tutorial at the end of this document for help)

2.    Select the case you want to focus on for this Assignment.

3.    Next, review your chosen case study for this weekâ€s Assignment and specifically focus on either the mis-pricing of the IPO or the increase dividend payout recommendation.

To complete this Assignment:

If you choose Case 4A: Palm IPO:

Write a short report (not more than 5 pages, double-spaced), developed around the following:

1.    Explain whether any of the three IPO phenomena (hot issue market, initial underpricing, and long-term underperformance) apply in regard to the Palm IPO.

2.    Is the Palm IPO an extreme case, or is the observed scenario common?

3.    Explain whether Palm and 3Com were efficiently priced on Palmâ€s first day of trading.

4.    Analyze the assessment of Palm made by analyst Paul Sagawa.

If you choose Case 4B: Dividend Policy of Linear Technology:

Write a short report (not more than 5 pages, double-spaced), developed around the following:

1.    Describe the payout policy of Linear Technology.

2.    Why do firms pay dividends? Why has the rate of dividend initiations changed over time?

3.    Should Linear return cash to its shareholders?

4.    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?

5.    What if Linear Technology repurchased shares instead of providing a pay out?

6.    What should Paul Coghlan recommend to the board?

 

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FINANCIAL DECISION MAKING – WEEK 7 – ASSIGNMENT was first posted on May 23, 2020 at 11:52 pm.
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