level 1 schweser book 5一题讨论

page 69,Q6, 2nd part.

shares outstanding - 40million
current price           - $28
question, use 20 million to repurchase shares of common stock in open market. P/E ration after share buyback will remain 20 times earning.

use 20m to purchase back shares, result in P/E unchanged.
我的问题是，这样说用earning 里面的一部分去买回股票，EPS 和P/E 不改变吗？
极限情况是用所有的56m 都去买shares，那最终earning 为零，EPS 肯定改变。

请大家讨论

Initial Net Income = 40mil * 1.4 = 56 mil $

Use 20mil $, remain 40mil - 20mil = 20 mil $ -- y

Shares outstanding after repurchase  = 40 mil - 20 mil $ / 28$  -- x

EPS = y / x = 1.12 $/share

EPS reduces after repurchasing.

This is my understand, if wrong, can someone else please correct me.

[此贴子已经被作者于2007-5-17 17:47:50编辑过]

Isn't repurchase like dividend here?