Reference no: EM133223881
Question: The President of ABC Corp. made this statement in the company's annual report: "ABC's primary goal is to increase the value of the common stockholder's equity over time. "Later on in the report, the following announcements were made:
a. The company contributed P2M to the Philharmonic Orchestra in Manila, where the head office of ABC is located.
b. The company is spending P600M to open a new plant in Davao City. No revenues will be produced by the plant for 4 years, so earnings will be depressed during the period versus what they would have been had the decision not been to open the new plant.
c. The company is increasing its relative use of debt . whereas assets were formerly financed with 30% debt and 70% equity, henceforth the financing mix will be 45/55.
d. The company uses a great deal of electricity in its manufacturing operations and it generates most of this power itself. Plans are to utilize nuclear fuel rather than coal to produce electricity in the future.
e. The company has been paying out half of its earnings as dividends and retaining the other half. Henceforth, it will pay out only 40% as dividends.
Discuss how each of these actions would be reacted to by the ABC's stockholders, customers and labor force, and then how each action may affect ABC's stock prices.
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