- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Valuation
- Learning Module 23. Market-Based Valuation: Price and Enterprise Value Multiples
- Subject 5. Price to Book Value
CFA Practice Question
When a company repurchases shares at a price higher than the current book value per share, it will make the stock appear ______on a P/B basis than it would appear if historical levels of P/B were used.
B. cheaper.
C. the practice has no impact on P/B.
A. more expensive.
B. cheaper.
C. the practice has no impact on P/B.
Correct Answer: A
This is because the practice lowers the over book value per share for the company.
User Contributed Comments 1
| User | Comment |
|---|---|
| quanttrader | when company repurchases shares, common shareholder equity will decrease -- ie lower BV which will inflate P/bv making the stock appear more expensive |