The analysis on Bob Burger’s Limited aimed at finding the impact of issuance of a buyback plan for its shares on the business performance. In this plan, the business used the option of using two strategies: buying back shares worth $3,000,000 or buying shares worth $5,000,000.
Perpetual Bond Interest rate
Shares worth $3 million are purchased with a bond of a similar amount. The total cost of this bond was high at $42,500 per month
Shares worth $5 million are purchased with a bond of a similar amount. The total cost of this bond was $70,800 per month.
New Total Shares
At the initial stage, the company had shares worth $13, 700,000
A bond of $3, million resulted in shares worth $10,700,000
A bond of $5 million resulted in shares worth $8,700,000
Earnings Per Share
The buyback of $5 million shares resulted in the highest earnings per share
The buyback of $3 million shares had the second highest earnings per share
The earnings per share was least at the original number of shares for the business
This ratio was highest at the original number of shares
The second highest position was from the buyback of $3 million worth of shares
The last position was from the buyback of $5 million worth of shares
A Net EPS, which was done after deducting interest and tax from the gross incomes showed that:
The buyback of $5 million shares has highest NET EPS
The second highest is buyback of $3million shares
The last is shares at original position
To sum up, this model shows buyback of $5 million of shares is the best since it results in highest value for shareholders as shown by NET EPS.