The statement of financial position of ELMB Ltd for the year just ended is summarised below: R millions ASSETS Non-current assets 19 600 Property, plant and equipment 15 680 Intangible assets 3 920 Current assets 17 200 Inventories 7 370 Trade and other receivables 6 030 Cash and cash equivalents 3 800 Total assets 36 800 EQUITY AND LIABILITIES Equity 23 200 Share capital (R5 par value) 8 000 Retained earnings 15 200 Non-current liabilities 700 Long-term borrowings 700 Current liabilities 12 900 Trade and other payables 11 240 Short-term borrowings 1 660 Total equity and liabilities 36 800 The company, which has been earning good profits, has been paying a dividend of R2 per share on its ordinary share capital in each of the last few years. The same rate of dividend has already been announced for the year just ended. The companys ordinary shares are now trading at a market price of R65. At a meeting of ELMB Ltds board of directors, three proposals were made: 1. The companys Chairperson suggested that, in addition to the normal dividend of R2 per share, the shareholders should be rewarded with an additional once-off special dividend exactly equal to the normal dividend. 2. The Chief Financial Officer (CFO) suggested that, instead of a special dividend, the company should make a 1 for 4 bonus (scrip) issue. The CFO argued that maintaining the same dividend rate on the increased share capital would provide better long-term rewards for the shareholders and would have a more favourable impact on the share price. 3. The Company Secretary argued that the issue of additional shares would depress the earnings per share (EPS) and have an adverse effect on the share price, so the company should repurchase 3% of the shares at a premium of 10% to the market price. The Company Secretary further argued that the receipt of a substantial premium over the market price of their shares, and the increased EPS resulting from reduction in the overall number of shares, would create the best value for shareholders. A non-executive director pointed out that the firms major shareholders are sophisticated institutional investors and, given investor rationality in an efficient market, none of the three proposals would make any difference to shareholder value.

Required: 4.1 With reference to the non-executive directors remark, evaluate the theoretical impact of each of the three proposals (the special dividend,the bonus issue and the share repurchase) on the wealth of an ELMB Ltd shareholder who currently owns 1 000 shares. Note: provide appropriate calculations, and comment on your results