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Paying out the dividend is as follows

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Reference no: EM132494881

Furn Services has experienced a reasonable trading year. They are deciding whether to pay out R124 000 in accumulated cash in the form of a dividend to shareholders or embark on a share repurchase campaign. Current earnings are R3.60 per share and the share sells for R40. Their abbreviated balance sheet before paying out the dividend is as follows:

Assets Equity and Liabilities

Tangible Assets R200 000 Equity R310 000
Inventories 20 000 Debt R 90 000
Receivables 30 000
Bank/cash 150 000
Total 400 000 Total R400 000

Required:

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

  • Calculating the number of shares in issue. (2)
  • The Dividends per share (for the first alternative, i.e. pay the dividend) (2)

Calculate:

  • The new share price (6)
  • The EPS (4)
  • 4.2.3.3 The Price- earnings ratio

Reference no: EM132494881

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