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8FF Question 1. 30% The company, Water Jets Corp., which has been earning good profits, has been paying a constant dividend on its ordinary share

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8FF Question 1. 30% The company, Water Jets Corp., which has been earning good profits, has been paying a constant dividend on its ordinary share capital in each of the last few years. At a meeting of the board, the company's Chairman suggests that, inaddition to the normal dividend, the shareholders should be rewarded with an additional one-off special cash dividend exactly equal to the normal dividend. The Chief Financial Officer (CFO) suggests that, instead of a special dividend, the company should make a 1 for 4 bonus issue. The CFO says 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. Tavourable Impact on the share price. The Company Secretary argues that the issue of additional shares would depress the EPS and have an adverse effect on the share price. The Company Secretary's view the company should repurchase a portion of the shares at a premium to the market price. The Company Secretary says 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. As a consultant hired by the board, you are required to give and JUSTIFY in detail your recommendation of the opinions presented

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