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Dividend question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Dividend question

  • This topic has 0 replies, 1 voice, and was last updated 13 years ago by yuensy82.
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  • June 11, 2012 at 11:24 am #53330
    yuensy82
    Participant
    • Topics: 2
    • Replies: 1
    • ☆

    Pls help me to solve this question:

    RL Co is currently deciding on the level and form of its next dividend. It is considering three option:
    i. A cash dividend payment of 20c per share
    ii. A 6% scrip dividend
    iii. A repurchase of 15% ordinary share capital at the current market price.
    The company recent financial information are given below:
    $’m

    Operating profit 18
    Finance cost 5
    Profit before tax 23
    Taxation 7.3
    Profit after tax 15.7

    Non-current assets 70
    Current asset 53
    123
    Financed by:
    Ordinary share capital(50c) 20
    Reserves 103
    123
    Required: If current cum dividend share price is $4.20 per share, calculate the effect of the three option on the wealth of a shareholder owning 1,000 shares in RL.

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