Eagles Electronics Case

Eagles Electronics Company Analysis
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Table of Contents
Table of Contents 2
Introduction 2
Events in product market that could influence the share price of the Eagles Electronics 3
Events in capital market that could influence the share price of the Eagles Electronics 3
Sources of capital available to Eagles Electronics 3
Strategies to enhance share price value of Eagles Electronics 4
Residual theory of dividends 9
Reasons why sometimes firms opt for dividend cuts 9
Impact of dividend cut on Eagles Electronics 10 Impact of takeover of the company (Benefits) 13
Assessing impact of takeover of produtos compostos by eagles electronics 14
Conclusion 15
References 17
Firms are reluctant to opt for dividend cuts and they only do so under extreme circumstances (Roberts, 2008).
Residual theory of dividends
Divicut is a case where the company is forced to retain funds through lack of alternative financing options, with the explicit assumption that the firm is capital-rationed with access only to internal sources of finance. Dividends should be paid only when there are no further worthwhile investment opportunities. Having decided on the optimal set of financing, the firm should distribute to shareholders only those funds not required for investment financing (Modigliani & Miller, 1961)
Reasons why sometimes firms opt for dividend cuts Dividend omissions are strategically motivated to preserve financial flexibility within the firm and violations of company covenants, as dividend cuts occur frequently even among healthy firms and are not necessarily indicator of financial distress (Bulan, 2009). Brockman & Unlu (2009) point out that countries with weaker creditor rights, firms adopt more restrictive payout policies in order to mitigate the agency cost of
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