easy · Investment Banking
A company has a Dividend Yield of 2.0% and a P/E multiple of 20x. It decides to use its excess cash to repurchase shares.
If the after-tax interest rate on its cash was 3.0%, will the buyback be accretive or dilutive to EPS?
- Break-even
- Accretive
- Dilutive
- It depends on the number of shares repurchased relative to the total shares outstanding.
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