60.1K

Verified Solution

Link Copied!

Boeing executives have just reviewed the company's 2018 operating performance and financial status at its April 29, 2019 annual shareholder meeting. Besides voting on new directors and approving executive compensation, in addition to other company business, such meetings are held to afford shareholders the opportunity to question Boeing's financial practices from an investor standpoint. Shareholder meetings are typically the only time during the year when shareholders and company executives interact.

Key investor takeaways from the shareholder meeting are as follows:

• Boeings net income for 2018: $10.46B
• Boeing issued a 10% stock dividend on December 4.
• Market value per share on December 4: $342.50 (close)
• Boeing executives revealed a plan to build a new $52B factory in South Carolina, opening a third production line for the 787 Dreamliner. Their plans include a $5B bond issue to finance, in part, the new factory. In addition, they announced a cut of 20% in the annual cash dividend from $6.84 to $5.47 per share starting in 2019.
• Market value per share on December 31: $322.50 (close). Retained earnings as of December 31: $55.94B. Availability of retained earnings for dividends on December 31 is restricted by $50B owing to the planned new 787 factory.
• Boeing executives explained that the drop in share price at December 31 was due solely to a downturn in the overall market and not to past or projected operating performance.

To encourage executive and shareholder interaction, officials from the companys investor relations program asked shareholders attending the meeting to submit written questions about Boeings financial management. As Boeings chief auditor and an independent, objective source of the companys financial data, Investor Relations has asked you to respond to the following questions. Your response will be emailed, via Investor Relations, directly to the shareholder who posed the question.

QUESTIONS START HERE:

1. Shareholder 1 (an investor new to the stock market): What did Boeing do with the cash received from the stock dividend issued in December 2018?

2. Shareholder 2 (a retiree): I owned 500 shares of Boeing in 2018 and have not sold any shares. How much of Boeing do I now own at December 31, 2018. What happened to the market value of my financial interest in Boeing?

3. Shareholder 3 (an investor suspicious of company intentions): I heard someone say stock dividends dont give me anything that I dont already have. Why then did you issue them? Are you trying to trick us?

4. Shareholder 4 (a sophisticated investor): Instead of a stock dividend, why didnt you just declare a cash dividend and let us buy the new shares that were issued?

5. Shareholder 5 (a recently widowed investor): Why are you cutting back on the dividends that I receive?

6. Shareholder 6 (an investor with financial acumen): If you have set aside $20B in retained earnings for the new 787 factory, why are you borrowing $5B and not just the $2B needed?

Be sure to take into account the perspective and circumstances of the investor, as noted parenthetically, when analyzing the selected questions and preparing your response.

Answer & Explanation Solved by verified expert

See Answer