a. What the key differences between a cash dividend and a share repurchase?

(3 marks)

b. Why might a company prefer share repurchases to cash dividends when planning to return capital to shareholders?

(3 marks)

The table to your right contains information regarding Kappa Ltd (the aquirer) and Gamma (Pty) Ltd (the takeover). Use this information to answer the following questions:

c. How many of its own shares will Kappa Ltd need to issue to purchase Beta (Pty) Ltd in terms of this agreement?

(3 marks)

d. What is the expected value of Gamma (Pty) Ltd to Kappa Ltd if it acquires it?

(1 mark)

e. Calculate the NPV of this deal and use this to advise Kappa Ltd whether it should go ahead with this deal on these terms.

(5 mark)

Exhibit 1.	Kappa Ltd	Gamma (Pty) Ltd	Other information
Current Share Price	R40	R2.50	The negotiated price is R4.50/share of Gamma.
No. of shares in issue (m)	800	100	Kappa pays for Gamma by issuing its own shares.
Current Market Value (Rm)	R32,000	R250	The expected vaue of the merged firms is R32 400m