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Calculating the number of shares in issue

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Question - Shady Ltd is deciding whether to pay out R100,000 in excess cash in the form of an extra dividend or implement a share repurchase. Net profit after tax is R155,000 and the share sells for R10. Their summarized statement of Financial Position prior to the dividend payment is as follows:

Assets Equity

Tangible assets 340,000

Inventories 50,000

Receivables 70,000

Bank/cash 14,000

Total 600,000

Equity and Liabilities

Equity 500,000

Debt 100,000

Total 600,000

Required - Evaluate each alternative (i.e. pay the dividend or repurchase the shares) by:

1. Calculating the number of shares in issue.

2. Calculating the dividends per shares (only for the first alternative, i.e. pay the dividend).

3. Calculating the new share price.

4. Calculating the Earnings Per Share.

5. Calculating the Price-Earnings ratio.

Reference no: EM133071558

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