Questions:
L Brands is currently trading at $35.00 per share with 275 million shares outstanding. The company has announced a $1.5 billion share buyback. Assuming stable market conditions, how would investors likely interpret these buybacks?

Assuming L Brands' quarterly net income and stock price remain constant at $35.00 during the buyback, calculate how the buyback will impact the company's quarterly EPS one year from now.

Reference answers:
The buyback will likely be viewed positively by investors, signaling that management believes its stock is undervalued and a good investment. By reducing the number of shares outstanding, the buyback will increase EPS and make shares more scarce. All else equal, these factors should push the stock price higher in the short term.

At a stock price of $35 per share, the $1.5 billion buyback will repurchase approximately 42.857 million shares. As a result, the number of shares outstanding will decrease from 275 million to 232.14 million (275 million - 42.857 million). This represents a 15.59% reduction in shares outstanding (42.857 million / 275 million). 

Old EPS = Earnings/275,000,000
New EPS = Earnings/(275,000,000 - 42,857,000) = Earnings/232,143,000

Percent Change in Earnings = (2750,000,000 / 232,143,000) - 1 = 0.1846

All else equal, the percent change in EPS will be roughly 18.46%