-10The president of United Semiconductor Corporation made this statement inthe company’s annual report: ‘‘United’s primary goal is to increase the valueof the common stockholders’ equity over time.’’ Later on in the report, thefollowing announcements were made:a.The company contributed $1.5 million to the symphony orchestra in SanFrancisco, where it is headquartered.b.The company is spending $500 million to open a new plant in Mexico. Norevenues will be produced by the plant for four years, so earnings will bedepressed during this period in comparison to earnings had the decisionnot been made to open the new plant.c.The company is increasing its relative use of debt. Whereas assets wereformerly financed with 35 percent debt and 65 percent equity, henceforththe financing mix will be 50-50.d.The company uses a great deal of electricity in its manufacturingoperations, and it generates most of this power itself. Plans are to usenuclear fuel rather than coal to produce electricity in the future.e.The company has been paying out half of its earnings as dividends andretaining the other half. Henceforth, it will pay out only 30 percent asdividends.Discuss how United’s stockholders, customers, and labor force will react to eachof these actions and then how each action might affect United’s stock price. solution from Essentials of Managerial Finance 14th - Besley, Brigham book
