See Table 2.5 EEB showing financial statement data and stock price data for Myde

Question

See Table 2.5 EEB showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco rapurchases 2.2 million shares each year from 2013 to 2016. What would be its earnings per share in 2016? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances) Select the besl choice below. O A. A repurchase does nat impact earnings directly, so any change to EPS will come from an increase in shares outstanding 2016 shares outstanding 54.3 millin4x2.2 mlin 52.1 million, EPS S9.7 million/52.1 million 0.19 B. A repurchase does not impact earnings directly so any change to EPS will come from educ on n shares outstanding. 2016 sheres outstanding 54 3 million 4 2.2 million 45.5 million, EPS $24 1 million, 45 5 million S0.53 A repurchase does not impact earnings direct so any change to EPS will come roma reduction in shares outstanding 2016 shares outstanding-54.3 million-4 2.2 million-45.5 million, EPS-S9.7 million/ 45.5 million-$0.21 D. A repurchase does nat impact earnings directly so any change to EPS will come from an increase in shares outstanding 2016 shares outstanding 54 3 millin4x2 2 millicn-52 1 million, EPS $24 1 million/521 millian S0 46

Explanation / Answer

Answer: Option B - A repurchase does not impact the earnings directly, so any change to the EPS will come from the reduction in shares outstanding = 54.3 mn - 4X2.2mn = 45.5mn. EPS =24.1mn/45.5mn = 0.53.

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