Swim tech Pools Inc. (SPI) reported the following in its financial statements for the quarter ended March 31, 2015.
During the quarter ended March 31, SPI reported Net Income of $ 5,000 and declared and paid cash dividends totaling $ 5,000.
Required:
1. Calculate earnings per share (EPS) and return on equity (ROE) for the quarter ended March 31.
2. Assume SPI repurchases 10,000 of its common stock at a price of $ 2 per share on April 1, 2015. Also assume that during the quarter ended June 30, 2015, SPI reported Net Income of $ 5,000 and declared and paid cash dividends totaling $ 5,000. Calculate earnings per share (EPS) and return on equity (ROE) for the quarter ended June 30, 2015.
3. Based on your calculations in requirements 1 and 2, what can you conclude about the impact of a stock repurchase on EPS and ROE?