The Dillon Company is planning a $1 million share repurchase. Its current stock price is $80 per share, and there are 800,000 shares outstanding prior to the repurchase. Earnings per share without the repurchase would be $4 per share.

1. Assuming the P/E ratio doesnt change, what would be the share price following the repurchase if the repurchase is funded using excess cash?

a. $80.99

b. $81.27

c. $82.04

d. $82.19

2. Instead of using excess cash, now assume the company funds the repurchase by borrowing at a before-tax rate of 4%. The tax rate is 30%. Assuming the P/E ratio doesnt change, what would be the share price following the repurchase?

a. $80.16

b. $80.29

c. $80.41

d. $80.56