QUESTION THREE

$[30]$

Glass Ltd is a company that manufactures glassware. The shareholders of the company have been disgruntled by the lack of dividends paid by the company as it conflicts with the company dividend policy. It has always been a high dividend payout company however in recent times dividends have been erratic.

Glass has made profits of R$225000$ in the current financial year ending $31$ December $2023$ and is considering the following options:

Pay out the full R$225000$ as a cash dividend.

Implement a share buyback$/$repurchase for R$225000.$

As the accountant for Glass Ltd you have established the following:

EPS $-$ R$3,90$

Market Value of share $-$ R$40$

You have also reviewed the following extracts of the balance sheet prior to the dividend pay out:

Share capital $($market value$)-$ R$620000$

Share premium $-$ R$400000$

Retained earnings $-$ R$120000$

Non$-$current assets $-$ R$1500000$

Non$-$current liabilities $-$ R$2000000$

Current assets $-$ R$250000$

Current liabilities $-$ R$275000$