QUESTION TWO [25]

CDL Ltd is deciding whether to pay out R100 000 in excess cash in the form of an extra dividend or implement a share repurchase. Net profit after tax is R155 000 and the share sells for R10. Their summarised statement of Financial Position prior to the dividend payment is as follows:

Assets		Equity and Liabilities
Tangible assets	340 000	Equity	500 000
Inventories	50 000	Debt	100 000
Receivables	70 000
Bank/cash	14 000
Total	600 000	Total	600 000

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

2.1 Number of shares in issue. (3)

2.2 Dividends per shares (only for the first alternative, i.e. pay the dividend). (3)

2.3 New share price. (9)

2.4 Earnings per share. (5)

2.5 Price-earnings ratio. (5)