CFA Practice Question

There are 131 practice questions for this study session.

CFA Practice Question

If, before the buyback, the after-tax cost of borrowing is greater than the earnings yield (E/P) of the shares, the EPS pre-repurchase will be ______ its post-repurchase level.

A. the same as
B. greater than
C. less than
Correct Answer: B

User Contributed Comments 8

User Comment
hkbn answer contradicts what is given in the text
alki no it doesn't, if cost of borr. is greater then EPS will decrease after repurchase...
Rotigga The answer is right. Read the question carefully, hkbn.
REITboy Does this not assume that the firm is borrowing funds to repurchase shares? Is this applicable if the firm is repurchasing with retained earnings?
jayj001 "PRE-repurchase"
dipu617 Yeah... the tricky part is "pre-repurchase".. :-)
davidkhang Tricky... Tricky...
davidt87 I'm so lost
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