Impact of Stock Repurchase on Financial Ratios

XYZ Corp is a mid-sized manufacturing firm that has historically maintained a stable dividend policy. Recently, the company announced a significant stock repurchase plan, allocating $500 million to buy back its shares, which is expected to reduce the number of outstanding shares by 20%. XYZ Corp’s management believes this move will enhance shareholder value. Before the repurchase, the company had the following financial figures:

• Net Income: $200 million
• Outstanding Shares: 100 million
• Total Assets: $2 billion
• Total Liabilities: $1 billion

Given this information, analyze the potential impact of the stock repurchase on the following financial ratios:

• Earnings per Share (EPS)
• Debt to Equity Ratio

Which statement regarding the financial ratios post stock repurchase is correct?