The following financial statistics is available in respect of a listed company: Price earning (P/E) ratio 8 times Number of equity shares 4 lakh Earnings available to equity shareholders ₹ 40 lakh Earnings per share ₹ 10

CS Professional · Capital Commodity and Money Market · PYQS · December 2017
The following financial statistics is available in respect of a listed company: Price earning (P/E) ratio 8 times Number of equity shares 4 lakh Earnings available to equity shareholders ₹ 40 lakh Earnings per share ₹ 10 Market price per share ₹ 80 The company is currently considering whether it should use ₹ 20 lakh of its earnings to pay cash dividends or purchase shares at ₹ 85 per share. As a financial consultant to the company, you are expected to provide answers for the following situations: (b) Determine the EPS after the proposed share repurchase.

Answer & Explanation:

Shares outstanding after repurchase = 4,00,000 - 23,529 = 3,76,471 Shares EPS After proposed repurchase = ₹ 40,00,000 / 3,76,471 = ₹ 10.625 per share

Topics: Corporate Finance

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