leone Collieries is deciding whether to pay out R60 000 in excess cash in the form of an extra dividend or a share repurch

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 12P
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Corleone Collieries is deciding whether to pay out R60 000 in excess cash in the form of an extra dividend or a share repurchase. Current profits are R3,00 per share and the share sells for R30. Their abbreviated balance sheet before paying out the dividend is: Equity 240 000 Bank/cash 60 000 Debt 60 000 other assets 240 000 300 000 300 000 Evaluate each alternative (i.e.: pay the dividend or repurchase the shares) by: 1.1. Calculating the number of shares in issue. 1.2. The dividends per share (for the first alternative, i.e. pay the dividend) 1.3. Calculate: 1.3.1. The new share price. 1.3.2. The EPS 1.3.3. The price-earnings ratio

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