A listed company is planning a share repurchase.

The following data applies

• There are 20 million shares in issue

• The share repurchase will involve buying back 10% of the shares at a price of $1.20

• The company is holding $4.8 million cash

• Earnings for the current year ended are $3.6 million

The Directors are concerned about the impact that this repurchase programme will have on the company's cash balance and current year earnings per share (EPS) ratio.

Advise the directors which of the following statements is correct?