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CFA Level 2
Topic: Corporate Finance
Reading: Analysis of Dividends and Share Repurchases
Companies can repurchase shares by using surplus/excess cash or they can issue debt to do it.
EPS after buyback = (Earnings - After-tax cost of debt)/Number of shares outstanding after buyback
A quick way to determine the impact of share buyback on EPS is to compare the earnings yield before buyback with the after-cost of debt.