Blaine Kitchenware, founded in , produces small appliances. Claims just under 10% of the $ billion US small appliance market. BLAINE KITCHENWARE Case Exhibit 1 Operating Results: Revenue , , , Less: Cost of Goods Sold , , The main fix in the case is whether Blaine Kitchenware’s should opt for repurchasing its own shares or not. If Blaine’s Kitchenware repurchases its shares, they.
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As a non family member, the stock repurchase will make me more skeptical because the shares owned by the family is rising exponentially and hence making it more dominant. Interest 0 Earnings Before Tax 77, 74, Less: About this resource This Business essay was submitted to us by a student in order to help you with your studies.
The company must determine the optimal debt capacity and capital structure, and subsequently estimate the resulting change in firm value and stock price.
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Our work is high quality, plagiarism-free and delivered on time. Although investors take dividend as an indicator for a company to succeed, they also expect dividend will be paid continuously at either stable or growing rate. Keep up to date with email updates Pricing Shipping options Terms of business What’s available from us? Registered Data Controller No: They should also consider things such their acquisition plans, their earnings per share and their dividend per share, ownership structure, capital structure and of course the reputation of the company in the market after the buyback.
Another scenario is to completely buy-back the market float. Cost of capital when the company is unlevered Ke This shows that the company has been keen on less retention of money to further invest. Following is the operating results for the year when the capital structure is levered and unlevered.
They also have to consider of the effect of the repurchase on various factors like the risks involved in raising a debt especially when they are large, very conservative and debt free. The company has been earning less profits and hence it is of the opinion of distributing the profits to shareholders instead of retaining it for further investments. However, concluding whether an unlevered or a levered capital structure is appropriate for a company largely depends on the industry debt equity ratio i.
Would you be in favor of it as a non-family shareholder? Seeing the industry debt equity ratio, the company has kept itself unlevered and this was a bit costly as the cost of debenture is fast cheaper if we compare it with the cost of equity.
Essay UK – http: This is not a very healthy situation for a public company as the interest of the minority shareholders are sometimes not taken care of. Each of us is qualified to a high level in our area of expertise, and we can write you a fully researched, fully referenced complete original answer to your essay question. Acquirers could pay way less than they originally expect to buy out the firm.
BLAINE KITCHENWARE by Erin Parker on Prezi
According to their current situation we do not think their current capital structure and payout policies are appropriate. Kitchenwaee is a form of returning the money back to shareholders and the shareholders who are out there for investment purposes feel it a better option to stay their money invested in a growing company instead of receiving petty dividends.
What are the primary advantages and disadvantages of such a move? We have not been given the seperate data for equity share capital and Retained Earnings.
The company has been earning profit and it should seek and endeavor further growth opportunities instead of returning it back to shareholders.
Moreover, the ownership percentage of family has also increased and hence resulting in the more dominant position in the company.
In summary, in order for Blaine to keep its current payout policies, they must reduce numbers of outstanding shares throughout share repurchasing.
View our pricing guide or login to see prices. It is evident that the cost of capital has reduced when the company decided to go for share repurchase using the surplus cash and debenture issue. This page has approximately words. The payout ratio of the company has been increasingly increasing for the past three years.
Essay UK offers professional custom essay writing, dissertation writing solutiin coursework writing service. A surplus of cash lowers the return on equity and increases the cost of capital; also large amount of cash may offer incentives to acquirer to and also decrease the enterprise value of Blaine. Joel Heilprin ; Timothy A Luehrman. Order a custom essay Print this page Search again Word count: The Case Centre is dedicated to advancing the case method worldwide, sharing knowledge, wisdom and experience to inspire and transform business education across the globe.
Attention is also given to the value of interest tax kitchemware. My account New to The Case Centre? Other Income expense 13, 13, Less: Finance, Accounting and Control. Cost of capital when the company is unlevered Dividend per share D1 0. Since they are totally equity financed, there is no tax shield.
Medicine essays Sloution essays Psychology essays Religious studies essays Science essays Sociology essays Essays menu. Blaine is currently over-liquid and under-levered and their shareholders are suffering from the effects. Tax ID No Accounting essays Architecture essays Business essays Coursework Economics essays Education essays Engineering essays English language essays English literature essays. Please find below the full details of the product you clicked a link to view.
There is a big question facing Blaine and that is why would their existing shareholders want to sell their equity back to the company?