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Gainesboro stopped paying dividends on its common stock some time ago for reasons explained in the case. They are now considering resuming dividend payments. There are three options listed on page 398. You have to list and discuss the pros and cons of each option and then select one. If you don’t like any of these options, you can make up your own dividend policy that you think is best for Gainesboro. You will have to redo Exhibit 8 on page 407 with the cash flows from your recommended dividend policy, and submit it along with your case report.

Gainesboro is going through some changes that hundreds of similar companies have already experienced. Before you select a new dividend policy, read the chapter in your Managerial Finance book on Dividend theories and practices. The data in Exhibits 6 and 7 will be crucial in your analysis. Also consider the economic projections in Exhibit 3.

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