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How can a share buyback boost shareholder returns

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Reference no: EM133002081

You have been hired as a financial consultant by Duncan Enterprise Ltd. Duncan Enterprise's ordinary/common share price is showing a declining trend and the CEO Mr. Harry Duncan is quite concerned. Also, the company requires some external funds to expand business overseas for which the CFO Mr. Larry Powell suggested that Duncan Enterprise raise these funds through either a private placement or issue preference shares with convertible features. In the monthly meeting with both Finance and Accounting departments, Mr. Duncan showed a recent Reuters news article1 on the changes happening in Europe regarding share buybacks. He quoted Morgan Stanley's chief European equity strategist Graham Secker who said about Europe: - "Something is changing: more companies are announcing bigger buybacks and I think this will continue...It can be a growth stock, a value stock, a cyclical stock. 1" In Mr. Duncan's request to you- the financial consultant, he would like to know your thoughts on the following matters:

Problem i. What is a share buyback and how can a share buyback boost shareholder returns?

Problem ii. What is a private placement and how effective is it for raising funds by companies?

Problem iii. What is the difference between convertible and non-convertible preference shares?

Problem iv. What effect(s) does convertible preference shares have on the EPS of a company?

Reference no: EM133002081

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