Impact of Share Repurchase on Financial Ratios

A company, ABC Corp, has historically maintained a stable dividend policy, paying a consistent annual dividend of $2 per share. Recently, the board decided to initiate a share repurchase program and allocate $10 million to buy back shares.

Prior to the repurchase, ABC Corp had 5 million shares outstanding and its net income was $15 million. Calculate the impact of the share repurchase on the following financial ratios:

• 1. Earnings per Share (EPS)
• 2. Price to Earnings (P/E) Ratio
• 3. Dividend Payout Ratio

Assuming the market price per share before the repurchase was $10, what will happen to each of these ratios after the repurchase has been executed, considering the share price remains constant?