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a firm has an after-tax cost of debt of 5%, a cost of equity of 9%,and earns 1% on its surplus cash. A share repurchase will increase the company's EPS when the repurchase is funded with :

A. debt,and the earnings yield is less 5%

B. debt, and the campany's PEratios is greater than 5%


C. surplus cash ,and the repurchase price is greater than the campany's BVPS.


which and why？

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关键词：CFA repurchase Thank you purchase Increase 民间

is the answer c?

right,can you give the detail analysis ?

A is wrong since the borrowing cost for repurchase is higher than earning yield, if earning yield>Cost of capital EPS increase, vice versa
B is wrong as the same reason as answer a , since P/E ratio, E as denominator