1. Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not?
2. Should Dubinski recommend a large share repurchase to Blaine’s board? What are the primary advantages and disadvantages of such a move?
Considering the following share repurchase proposal: Blaine will use $209 million of cash from its balance sheet and $50 million in new debt-bearing interest at the rate of 6.75% to repurchase 14 million shares at a price of $18.50 per share. How would such a buyback affect Blaine Kitchenware? Consider the impact on, among other things, BKI’s EPS and ROE, interest coverage and debt ratios, the family’s ownership interest, and the company’s cost of capital.
As a member of Blaine’s controlling family, Would you be in favor of this proposal? Would you be in favor of it as a non-family shareholder?
How does the proposal sketched above differ from a special dividend of $4.39 per share?
Requirements:
Answer all the above questions in the report. Be specific.
Briefly show your calculation in the report, and attach your Excel spreadsheet.
The report should be 4-5 pages long, single spaced.
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