QUESTION TWO

$2\mathrm{.}1$ Distinguish between a participating preference share and a convertible preference

share.

$2\mathrm{.}2$ Fastspeed Couriers has experienced one of their toughest years yet. They are

deciding whether to pay out R$80000$ in accumulated cash in the form of an extra

dividend to shareholders or embark on a share repurchase campaign. Current profits

are R$3\mathrm{.}40$ per share and the share sells for R$36.$ Their abbreviated balance sheet

before paying out the dividend is as follows:

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

Calculating:

$2\mathrm{.}2\mathrm{.}1$ Number of shares in issue.

$2\mathrm{.}2\mathrm{.}2$ The dividends per share $($only for the first alternative, i$.$e$.$ pay the dividend$)(2)$

$2\mathrm{.}2\mathrm{.}3$ The new share price.

$2\mathrm{.}2\mathrm{.}4$ The Earning per share

$2\mathrm{.}2\mathrm{.}5$ The price$-$earnings ratio.