An analyst does research about a company's earnings and gathers the following information about the company:
·Earnings per share is $1.20
·Price-to-earnings ratio is 17
·Book value per share is $16
·Market value per share is $18
All else being equal, if the company funds a share repurchase using debt with an after-tax cost of 6.5%, the company's EPS will most likely:A. decrease.
B. remain the same.
C. increase.
参考答案：A
解析： 公司回购股票依资金来源可分为两类：一是使用公司的剩余现金进行回购，二是举债进行回购。
当使用剩余现金时，只要多余现金的回报率低于留存收益的资金成本，就会使EPS上升。
当举债回购股票时会产生利息费用(interest expense)，导致净利润下降，但回购股票会使得发行在外的股份数量减少，即计算EPS时的分子分母会同时下降，EPS的变化取决于earnings yield(earnings yield= EPS/ stock price)和after-tax cost of debt之间的大小比较。
当after-tax cost of debt小于earnings yield时，回购股票使EPS上升：
当after-tax cost of debt大于earnings yield时，回购股票使EPS下降。
题目中，after-tax cost=6.5%＞earnings yield=1/17=5.9%，所以EPS会下降。