Le Pomme de Terre Corporation has enjoyed considerable recent success because Brazil placed a huge order for potatoes. This business is not expected to be repeated, and Le Pomme de Terre has $6 million in excess funds. The company wishes to distribute these funds via the repurchase of stock. Presently, it has 2,400,000 shares outstanding, and the market price per share is $25. It wishes to repurchase 10 percent of its stock, or 240,000 shares.

334 Part 111 F i n a n c i n g nlzd Dioillelzd P o l i c i e s

a. Assuming no signaling effect, at what share price should the company offer to repurchase?

b. In total, how much will the company be distributing through share repurchase?

c. If the company were to pay out the funds through cash dividends instead, what would be the market price per share after the distribution?

(Ignore tax considerations.)