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A company has the following information: 2014 share repurchase plan of $4 billion Average share price...

A company has the following information:

  • 2014 share repurchase plan of $4 billion
  • Average share price of $60 for the year 2013
  • Expected EPS growth for 2014 of 10%

What should the number of shares repurchased by the company be in your financial model?

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Answer #1

Answer:-

The share repurchase amount = $ 4 billion
Average share price in 2013 = $ 60
The expected growth in EPS in 2014 = 10 %
The share price increase in 2014 may not be linearly related to the EPS growth in 2014 though in the long term the EPS and stock price are proportionally related but not in the short term.

The share repurchase should be based on previous year stock price of $ 60.

The number of shares repurchased = $ 4 billion / Average share price
= $ 4 billion / $ 60
= $ 4000 million / $ 60
= 66.67 million shares

This should be used in financial model

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