Hi ,
If there is a Share Repurchase funded by Internal funds ,and there is Opportunity cost of equity and Income tax rate involved , Could any one explain what implications will it have on EPS , and how Opportunity cost of equity and tax rate will come into play
EPS1 = NI / S
EPS2 = (NI - (O x C) x (1 - T)) / (S - (C/P))
EPS1 = EPS before repurchase
EPS2 = EPS after repurchase
P = price per share (at the time of repurchase)
S = shares outstanding (before repurchase)
NI = est. net income (before repurchase)
O = opportunity cost of capital
C = cost of repurchase with cash
T = tax rate