4. (Dividends and share repurchases: Basics) Devon Ltd. common shares sell at $40 a share and their estimated price-to-...

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4. (Dividends and share repurchases: Basics) Devon Ltd. common shares sell at $40 a share and their estimated price-to-earnin

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Answer 1

Answer #1

Earnings Yield(E/P) = 1/[P/E] = 1 / 32 = 0.03125, or 3.125%

As the cost of capital is greater than the earnings dilution(i.e., EPS will decrease) will result from the buyback.

So, Option "b" is correct.

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Answer 2

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Add Answer to: 4. (Dividends and share repurchases: Basics) Devon Ltd. common shares sell at $40 a share and their estimated price-to-...

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