AutoZone4copy.

The Best WritersIntroduction:3AutoZone:41.How has AutoZone’s stock price performed over the previous five years? What other financial measures can you cite that are consistent with the stock price performance?52.How does a stock repurchase work? Why would a company use this tactic? What impact does it have on: EPS? ROIC?73.How much of AutoZone’s stock price performance should we attribute to the share repurchase program?94.Assume that AutoZone is planning to stop its share repurchase program. What would be the best alternative use of those cash flows? Why?105.What should Johnson do about his holdings of AutoZone shares?12Numerical analysis:146.Estimate the impact of share repurchases on financial performance metrics147.Estimate the impact of shares repurchases on ROIC14Conclusion:15Resources:16that their stock are undervalued (the market price is lower than the book value), so they choose to buyback it shares to mateine their market value. Moreover, getting advantage of income tax. If the company distribute its cash flow as a dividend, then the shareholders are taxed at personal income tax rate in the same year dividends are received. But, if its buyback shares the shareholders will get capital gains; also, the capital gains are taxed at a lower rate. Also, companies looking for maintain the capital structure by making the correct allocation between debt and equity. Usually purchasing of shares is modify and maintain balance of debt and equity.In addition, buyback provide the flexibility more than dividends, because the dividends must be payed immediately rather than repurchase share it’s takes a period of time and sometimes the company can cancel it and use the cash flows in the interest of the company. Earnings per Share (EPS) is the most important measurement for valuing a company and we can calculate by dividing the total earnings by the number of shares outstanding. The impact of buyback shares will be positive on EPS, if the number of outstanding shares is reduced, the EPS will increase and that will make the company more favorable for investors. Also, the increase of EPS will make the price of the stocks be higher.Also, the repurchasing shares will return on Invested capital (ROIC), it’s one of the best metrics to evaluate corporates performance. Keep in maid, there are some factors will be removed when we calculate the ROIC like non-economic accounting issues and financial leverage impacts. As the transaction done it shows on the balance sheet as a reduce in the company’s cash holdings, and that will reduce the total assets and total shareholders’ equity also. This is shown in this case where there was a significant reduction of both the shares outstanding and equity capital. Shares outstanding had dropped from $65,960 in 2007 to $40,109 2011 by %39.19, and shareholders’ equity had been reduced to a negative $1.2 billion in 2011 it was $403,200 in 2007 that means it’s reduced by -%411.06. As a result, AutoZone management focused on the opportunities that led to revenue growth and capital stewardship. So, it’s resulted in that strong working capital.We can see the relationship between the share repurchased and ROIC in exhibit 28.9, the ROIC has a strong increase after the share repurchase. Moreover, this transaction makes the growth of AutoZone to be huge and stable where the economy was in recession this had made a large impact on issuing a likable ROIC. we can say now, ROIC is clearly certifying that AutoZone is offering strong returns for its investors.3.