Example: Black and Smith is expexted to have $88 million in earnings and plans to distribute $44 million to shareholders through dividends or stock repurchases, Currently the stock price is $20, and there are 22 million shares outstanding. A large repurchase could be executed at $22 per share. Calculate the earnings per share difference if the repurchase is implemented.

Answer: EPS0=$88 million/22 million shares=$4.00

Shares repurchased44 million/$22=2 million shares

EPS1=$88 million /20million shares =$4.40

New shar price= EPS1*P/E=$4.40*5= $22

问题： 为什么EPS1还是用 $88 million 算， 而不是用 $88-$44=$44 来算。

P/E ratio 为什么不变？

望达人解答 谢谢了。

第一，此题前提是假定了P/E不变的。

第二，$44million 并不一定就是$88million的其中部分，也可以是retained earnings.因此在考虑repurchase后，不能做$88-$44后再计算EPS.