r_hogge wrote "Why would the share price go to $6.66, when it was only $2.50 when the company bought the share, you have book value & share price are two different things."
Yes, they are two different things. I didn't say the shares would trade at $6.66, I said the book value would increase to $6.66. The only trading price I gave in the example was the $2.50 market price that the company bought the four shares at.
For supposedly smart guys, some of you are making really dumb comments about the effect of buybacks on book value. Of course, if you buy back stock at less than book value, it increases the book value of the remaining shares. jtrader's example is simple enough to understand. Don't try to overanalyze a very simple proposition. It doesn't take a rocket scientist.
May you can understand the converse. Iif you buy back stock at more than its book value, you are paying out more cash than you are getting in book value, and the book value for the remaining shares will decrease. Simple enough.