Alpha Ltd are deciding whether to pay out 90 000 in accumulated cash in the...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Alpha Ltd are deciding whether to pay out 90 000 in accumulated cash in the form of an extra dividend to shareholders or embark on a share repurchase scheme. Current profits are 3.40 per share and their shares currently trade for 35.
Their abbreviated balance sheet before paying out the dividend is as follows:
Equity 350 000 Bank/Cash 130 000
Debt 120 000/470 000 Other assets 340 000/470 000
Evaluate each alternative (i.e. pay the dividend or repurchase the shares) by
1 Calculating the number of shares in issue
2 The dividends per share (only for the first alternative, i.e. pay the dividend)
3. Calculate the new share price
4. Calculate the EPS
5 Calculate the price-earnings ratio
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
