Blaine Case Blaine Case Blaine Kitchenware is a company that has occupied the industry for over 80 years and continues to gain control in the market it occupies. As the CEO of the company, Mr. Dubinski is dealing with a challenging decision of determining what is best for the family company.
Get Full Essay Get access to this section to get all help you need with your essay and educational issues. Inappropriate current capital structure and payout policies3 2.
Advantages and disadvantages of large share repurchase proposal4 a. Effects of share repurchase on assets, liabilities and equity on balance sheet5 b. Effects of share repurchase on debt ratios and interest coverage ratio5 c.
Bonus question—effects on wacc6 4. Effects of the proposed share repurchase on shareholders6 Appendix7 Executive Summary The main problem faced by BKI is over liquidity and under leverage. The capital structure of Blaine is too conservative.
The main source of funding for business comes from equity capital. In the meantime, current payout policies make payout ratio go up, lowering efficiency of the firm. The company can solve these problems by issuing debt to repurchase its stock.
Debt is a lower cost source of financing and allows a higher return to the. In addition, the company can benefit from tax-deductible interest and thus lower tax burden.
However, debt is not always excellent, and we should analyze whether the profitability of raising the debt is greater than the cost of leverage. Overview of problems Blaine Kitchenware was a mid-sized producer of small appliances primarily used in residential kitchens.
Moreover, its earnings per share had fallen significantly sincepartly due to dilutive acquisitions. The first was during World War II and second during oil shock of s.
Inappropriate current capital structure and payout policies Currently, the main source of funding for its business comes from equity capital. Here are some explanations. First, current capital structure makes high cost of financing despite its low risk. Although risk will increase as debt increases, debt financing will lower the cost of capital and increase returns to shareholders.
Debt is a lower cost source of funds and allows a higher return to the shareholders by leveraging their money. Additionally, the company can benefit from tax shield by tax-deductible interest payment.Blaine Kitchenware Inc, Capital Structure Currently Blaine has an inappropriate capital structure that negatively affects shareholders in multiple ways.
The current large cash position is lowering returns to existing shareholders and should be used in a way that creates value. Blaine Kitchenware Case Solution. Review of capital structure and payout policies.
From the following situation, it seems that the Blaine’s didn’t disclose the proper implementation of the definedpolicies because of the significant difference between debt and equity margin. Note: in question 1 of the original case discussion, the investment banker recommended that Blaine borrow $50 million at % and use the proceeds plus $ million of its cash and securities to purchase 14 million shares at $ / share.
Blaine Kitchenware Inc. Take-Home Case Assignment BSAD Prof. Vishwakarma Grady McQuillan Joe Mackay Mitch Chown Alessandro Galeone 9%. This creates a big problem for the firm because their returns are lower than others and it reduces how outsiders will value the firm.
the company issued new shares with some of its . Blaine Kitchenware Inc, Capital Structure Currently Blaine has an inappropriate capital structure that negatively affects shareholders in multiple ways. The current large cash position is lowering returns to existing shareholders and should be used in a .
BlaineKitchenware - Free download as Powerpoint Presentation .ppt /.pptx), PDF File .pdf), Text File .txt) or view presentation slides online.
Blaine Kitchenware Case Study Solution. Group1 Blaine. Blaine Kitchenware Inc. BLAINE KITCHENWARE INC: CAPITAL STRUCTURE CASE STUDY 5/5(13).