A company is planning to spend $15,814 for a share repurchase program

Finance Aug 08, 2020

A company is planning to spend $15,814 for a share repurchase program. The company's current EPS is $1.35 per share. The current share price is $54.50 per share, and there are 2,616 common shares currently outstanding. Ignoring taxes, what is the company's P/E ratio immediately after the share repurchase has been completed?

Question 16 options:

32.3

33.2

34.1

35.0

35.9

Expert Solution

Computation of P/E Ratio:

P/E Ratio = Price / Earning per Share after Repurchase

P/E Ratio = $54.50 / $1.52 = 35.90 times

Workings:

Total Earning Before Repurchase = $1.35 * 2,616 shares = $3,531.60

Number of Shares Repurchased = $15,814 / $54.50 = 290.17 or 290 shares

Number of shares after repurchase = 2,616 - 290 = 2,326 shares

New Earning per Share after Repurchase = $3,531.60 / 2,326 shares = $1.52

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