1. How would your answers to the previous problem change if Manpower in plans to pay off its outstanding debt of $100 million next year and become a debt-free company?
2. You are an institutional investor and have the collected the following information on five maritime firms to assess their dividend policies.
|
Company
|
FCFE
|
Dividends Paid
|
ROE
|
Beta
|
|
Alexander & Brown
|
$55
|
$35
|
8%
|
0.80
|
|
American President
|
$60
|
$12
|
14.5%
|
1.30
|
|
OMI
|
-$15
|
$5
|
4.0%
|
1.25
|
|
Overseas Shipholding
|
$20
|
$12
|
1.5 %
|
0.90
|
|
Sea Containers
|
-$5
|
$8
|
14%
|
1.05
|
The average risk-free rate during the period was 7 percent, and the average return on the market was 12 percent.
a. Assess which of these firms you would pressure to pay more in dividends.
b. Which of the firms would you encourage to pay less in dividends?
c. How would you modify this analysis to reflect your expectations about the future of the entire sector?