【每日一练】CFA 一级(2015年)
作者:暖白
2019-08-29 09:10
Question:
A firm’s price-to-earnings ratio (P/E) is 12.5. The firm has decided to repurchase shares using external funds that have an after-tax cost of 9%. After the repurchase, the earnings per share (EPS) will most likely:
A. decrease.
B. increase.
C. remain unchanged.
Answer = A
Convert the P/E to the earnings yield, which is the earnings-to-price ratio (E/P): 1/12.5 = 8%. Because the after-tax cost of the external funds is higher than the earnings yield (i.e., 9% > 8%), the EPS will decrease after the repurchase.
CFA Level I
“Dividends and Share Repurchases: Basics,” George H. Troughton and Gregory Noronha
Section 4.2.1
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