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A share repurchase by the firm using corporate cash:
AHas no impact on EPS
BAlways reduces firm value
CIncreases EPS by reducing share count
DIncreases share capital
Answer & Solution
Correct answer: C. Increases EPS by reducing share count
1. Buyback uses cash to repurchase outstanding shares.
2. Shares outstanding fall → EPS rises (PAT unchanged).
3. Effect on shareholder wealth (ex tax) is similar to a cash dividend.
_Source: ICAI BoS CA Inter Paper 6A, Ch 8 "Dividend Decisions", §3 — Share Repurchase_