continue to increase the dividend payments. Similar cases of the past show that any decline on the dividend payments influences the stock price negatively. Moreover, the company has already made some investments, which are expected to mature in the following years and as a result no significant capital expenditures is required. (Exhibit 6- forecasts). Finally, we believe that the company's profits will not be harmed from competition. The reason is that the basic power-network belongs to it, and the company can charge other companies to use it in a profitable way (without harming the competition). So we are advising James Broadhead to declare a dividend higher than 2.47 dollars per share.Q.5 Fully explaining your answer, what recommendation should Kate Stark give to her investors -buy, hold or sell- on 5th May 1994?In order to answer this question, we need to look at factors which would induce investors to BUY a share in FPL Group on the 5th May 1994, and factors which would induce them to SELL. Once we have done that, we will be in a better position to judge which factors outweigh which, and thus decide whether it is better to buy, hold or sell.1. Positive Factors Competent management: When Broadhead joined FPL Group, the company was under the strain of major structural and strategic problems. It had a number of businesses unrelated to its core electric skills, and its spiralling costs had resulted in electric rates among the highest in the country. The company could no longer meet the fast growing demand, and employees were suffering from low morale. Based on his experience in the natural resources and telephone industries, Mr. Broadhead changed the culture, structure and long-term strategy of the company. Thanks to these changes FPL Group became a focused, operational rather than bureaucratic, relatively flat business, with co...
