Answer to Question #133081 in Finance for Sme

Question

Pukri Ltd is deciding whether to pay out R90 000 in excess cash 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 Assets 310 000
400 000 400 000
Evaluate each alternative (i.e: pay the dividend or repurchase the shares) by:
1.1 Calculating the number of shares in issue (4)
1.2 The dividends per share (for the first alternative, i.e. pay the dividend) (2)
1.3 Calculate:
1.3.1 The new share price (6)
1.3.2 The EPS (4)
1.3.3 The price-earnings ratio (4)

Answer 1

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