A company’s gearing is well below its optimal level and therefore it is considering implementing a share re-purchase programme.
This programme will be funded from the proceeds of a planned new long-term bond issue.
Its financial projections show no change to next year’s expected earnings.
As a result, the company plans to pay the same total dividend in future years.
If the share re-purchase is implemented, which THREE of the following measures are most likely to decrease?
A . The Weighted Average Cost of Capital
B . The cost of equity
C . The interest cover
D . Next year’s dividend per share
E . The gearing, based on book value (debt ÷ (debt + equity))
F . The number of shares in issue
Answer: A,C,F