Question One

Pukri LTD is deciding whether to pay out R90 000 in excess in the form of an extra dividend or a share repurchase. Current profits are R2,40 per share and the share sells for R20. The abbreviated balance sheet before paying out the dividend is

Equity 240 000 Bank/cash 90 000

Debt 160 000 Other Assests 310 000

400 000 400 000

Evaluate each alternative (I.e.: pay the dividend or repurchase the shares) by:

1. Calculating the number of shares in issue

1.2 The dividends per share (for the first alternative, i.e. pay the dividend)

1.3 Calculate:

1.3.1 The new share price

1.3.2 The EPS

1.3.3 The price earnings ratio