Share repurchase will increase a firms EPS, if the share repurchase is funed by firm's surplus cash, and the repurchase price is greater than the company's BVPS. Why? why the repurchase price should be greater than BVPS in order to increase the EPS?作者: kd26gioi 时间: 2011-7-13 15:10
smartpants Wrote:
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> Share repurchase will increase a firms EPS, if the
> share repurchase is funed by firm's surplus cash,
> and the repurchase price is greater than the
> company's BVPS. Why? why the repurchase price
> should be greater than BVPS in order to increase
> the EPS?
Book Value has nothing to do with EPS.
Share repurchase will increase a firm's EPS, if the share repurchase is funded by firm's idle cash because Earnings don't decrease but shares outstanding do.
Only when you borrow funds, your after tax cost of debt should be less than earnings yield for EPS to increase.
If the BV is greater than Market Price (Repurchase price), share repurchase will increase BVPS, not EPS作者: agulani 时间: 2011-7-13 15:10
