50.1K

Verified Solution

Link Copied!

At the end of the fiscal year ending 318 December 2018, MCS& Co reported common equity of Kshs 649 million on its statement of financial position with Kshs 490 million invested in financial assets in the form of cash equivalent and short term investments) and no financing debt. For the fiscal year ending 31 December 2019, the company reported Kshs 74 million in comprehensive income of which 11 million was after tax earnings on the financial assets. This month MCS& Co is distributing Kshs 340 million of financial assets to the shareholders in the form of special dividends. i. Calculate MCS& Co return on common equity for 2019 Holding all else constant, what would be MCS& Co ROCE after the payout of the Kshs 340 million as special dividends. Would you expect the payout of the special dividends to increase or decrease earnings in the future? (Explain) iv. What effect would you expect the payout of the special dividends to have on the value of MCS& Co shares? At the end of the fiscal year ending 318 December 2018, MCS& Co reported common equity of Kshs 649 million on its statement of financial position with Kshs 490 million invested in financial assets in the form of cash equivalent and short term investments) and no financing debt. For the fiscal year ending 31 December 2019, the company reported Kshs 74 million in comprehensive income of which 11 million was after tax earnings on the financial assets. This month MCS& Co is distributing Kshs 340 million of financial assets to the shareholders in the form of special dividends. i. Calculate MCS& Co return on common equity for 2019 Holding all else constant, what would be MCS& Co ROCE after the payout of the Kshs 340 million as special dividends. Would you expect the payout of the special dividends to increase or decrease earnings in the future? (Explain) iv. What effect would you expect the payout of the special dividends to have on the value of MCS& Co shares

Answer & Explanation Solved by verified expert

See Answer