Page 29 - FINAL CFA II SLIDES JUNE 2019 DAY 6

LOS 22.j: Calculate the effect of a share READING 22: DIVIDENDS AND SHARE REPURCHASES: ANALYSIS
repurchase on book value per share (BVPS).

MODULE 22.2: STOCK BUYBACKS

EXAMPLE: Impact of share repurchase on book value per share. Consider two companies, Alpha and Beta, which are
both considering the repurchase of $5 million worth of shares. Additional details are given below.

Calculate the impact of the repurchase transactions on BVPS.

Alpha’s BVPS of $15.00 was less than the $20.00
stock price, so after the buyback, Alpha’s BVPS
decreased to $13.33.

Beta’s BVPS was greater than the $20.00 stock price,
so after the buy back, Beta BVPS increased from
$25.00 to $26.67!

After a stock repurchase, if the price paid is higher (lower) than the pre-repurchase
BVPS, the BVPS will decrease (increase).