8 million shares outstanding at a price of $42.50 per share.

Immediately prior to the share repurchase announcement, share price was

$37.00. The company was surprised that nearly 1 million shares were tendered by stockholders wanting to sell. The company had to repurchase the 100,000 shares on a pro-rata basis according to the number of shares tendered.

a. Why did so many stockholders tender their shares? At what price should the company have made its repurchase offer?

b. Who gained from the offer? Who lost?