Page 31 - 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.

After a stock repurchase, the number of outstanding shares will decrease and the book MODULE 22.2: STOCK BUYBACKS
value per share (BVPS) is likely to change as well. If the price paid is higher (lower)
than the pre-repurchase BVPS, the BVPS will decrease (increase).

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 increased from $25.00 to $26.67 after
the buyback because the BVPS was greater than the
$20.00 stock price.