In mid-September 2025, Emily Ray, the CFO of Rocksmith Machine Tools Corporation, a large computer-aided design and manufacturing equipment manufacturer, needs to decide whether to pay out dividends to the firm’s shareholders or to repurchase stock. If Ray chooses to pay out dividends, she will also have to decide upon the magnitude of the payout. A secondary question is whether the firm should embark on a campaign of corporate-image advertising and change its corporate name to reflect its new outlook.

The case serves as a review of the many practical aspects of dividend and share-buyback decisions, including (1) signaling effects; (2) clientele effects; and (3) the finance and investment implications of increasing dividend payouts and share-repurchase decisions. This case can follow a treatment of the Miller–Modigliani dividend-irrelevance theorem and serves to highlight practical considerations to bear in mind when setting a firm’s dividend policy.

This is an updated version of UVA-F-1765. At the University of Virginia Darden School of Business, this case has been successfully used in the core MBA finance course.