Ropeonfire is currently deciding on the level and form of its next dividend.

It is considering three options: (i) a cash dividend payment of Sh 20 per share;

(ii) a 6 per cent scrip dividend;

(iii) a repurchase of 15 per cent of ordinary share capital at the current

market price. The companys financial statements are given below: Profit and loss account Sh million Sh million Operating profit 1800.0 Net interest earned 500.0 2300.0 Taxation 7,300.0 Distributable earnings 15,700.0 Balance sheet Fixed assets 7,000.0 Current assets: Debtors 2,200.0 Stock 2,100.0 Cash 4,100.0 8,400.0 Current liabilities (3,100.0) 12,300.0 Financed by: Ordinary share capital (50p shares) 2,000.0 Reserves 10,300.0 12,300.0 (a) If the current cummulative dividend share price is Sh420, calculate the effect of the three options on the wealth of a shareholder owning 1000 shares in Ropeonfire. (b) Explain briefly how the companys decision will be influenced by the opportunity to invest Sh 6,000m in a project with a positive net present value.