A firm is planning to borrow money to make an equity repurchase to increase its...
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A firm is planning to borrow money to make an equity repurchase to increase its stock price. It is basing its analysis on the fact that there will be fewer shares outstanding after the repurchases, and higher earnings per share. There are no taxes. a. Will earnings per share always increase after such an action? Explain. b. Will the higher earnings per share always translate into a higher stock price? Explain. c. Under what conditions will such a transaction lead to a higher price
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