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QUESTION 2.   (5 MARKS) Jill currently holds 10,000 shares in General Plants Company. The company has...

QUESTION 2.  
Jill currently holds 10,000 shares in General Plants Company. The company has issued a total of 500,000 ordinary shares and no preference shares are issued. The available earnings for ordinary shareholders totals $550,000 and its shares are currently selling for $11.00 per share in the market. The company intends to retain these earnings and pay a 10.00% bonus shares instead of a cash dividend.                                                                
Find the following:                                                                                   
(a) What are the current earnings per share (EPS) before the bonus shares distribution? (1 mark)  


                                              

(b) Expressed as a percentage, what proportion of General Plants Company does Jill own before the bonus share distribution? (1 mark)




(c) What is the market value of Jill’s shares before the bonus share distribution? (1 mark)




(d) Expressed as a percentage, what proportion of the General Plants Company will Jill own after the bonus share distribution? (1 mark)




(e) What will be the market value of Jill’s shares after the bonus share distribution, if the market price is $10.00 per share? (1 mark)



     
 

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