NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
Meridian Industries has 10 crore shares outstanding at ₹250 each. It buys back 1 crore shares through a tender offer at ₹275 per share. Net profit is ₹100 crore before and after the buyback (ignore loss of interest income). What is the change in EPS, rounded to two decimals?
EPS rises from ₹10.00 to ₹11.11. The buyback cuts shares outstanding from 10 crore to 9 crore while profit stays ₹100 crore, so EPS becomes 100 divided by 9, about ₹11.11.
- ARises from ₹10.00 to ₹11.11Correct
- BRises from ₹10.00 to ₹10.50
- CFalls from ₹10.00 to ₹9.09
- DStays at ₹10.00
Explanation
Initial EPS = 100/10 = ₹10. After buyback, shares are 9 crore, so EPS = 100/9 = ₹11.11. The buyback price does not affect the share count reduction. The option showing a fall uses 11 crore shares, which would apply to an issue, not a buyback.
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