E(Re)≈ D/P + (%ΔE − %ΔS) + %ΔP/E
he Grinold-Kroner model states that the expected return of a stock is its dividend yield, plus the inflation rate, plus the real earnings growth rate, minus the change in stock outstanding, plus changes in the P/E ratio:
Remember, a share repurchase is a reduction in shares outstanding, which means the company buys back shares and pays cash to investors.
a share repurchase is a negative %ΔS term,
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