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w At the end of the fiscal year ending 31st December 2020, Discount Ltd reported common equity of Kshs 32,450,000 on its statement of financial
w At the end of the fiscal year ending 31st December 2020, Discount Ltd reported common equity of Kshs 32,450,000 on its statement of financial position with Kshs 24,500,000 invested in financial assets (in the form of cash equivalent and short term investments) and no financing debt. For the fiscal year ending 31st December 2021, the company reported Kshs 3,700,000 in comprehensive income of which 550,000 was after tax earnings on the financial assets. This month Discount Ltd is distributing Kshs 17,000,000 of financial assets to the shareholders in the form of special dividends. i. Calculate Discount Ltd return on common equity for 2021 ii. Holding all else constant, what would be Discount Ltd ROCE after the payout of the Kshs. 17,000,000 as special dividends. iii. Would you expect the payout of the special dividends to increase or decrease earnings in the future? (Explain) iv. What effect would you expect the payout of the special dividends to have on the value of Discount Ltd shares
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