Evaluation on share repurchase proposal of blaine kitchenware inc. essay

Essay Sample Posted on by bros2qET1 1. Inappropriate current capital construction and payout policies3 2.

Evaluation on share repurchase proposal of blaine kitchenware inc. essay

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.

Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc. | Essay Example

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.

Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc. Essay Sample

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.

Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc. | Essay Example

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.

Effects of share repurchase on debt ratios and interest coverage ratio5 c. Effects of share repurchase on Earnings Per Share and Return On Equity5 d. Bonus question—effects on wacc6 4. its acquisition plans (which is mainly done by cash and BKI stocks). should it only partially repurchase the market float or should it go for complete buyback (in which the Blaine family becomes the owner of all the remaining shares).The dilemma Blaine Kitchenware Inc. 3. Evaluation On Share Repurchase Proposal Of Blaine Kitchenware Inc. Filed Under: Research papers Tagged With: The Essay on  Blaine Kitchenware: Capital Structure Advantages and disadvantages of large share repurchase proposal The large share repurchase should be recommended to Blaine’s board. The followings are advantages of share.

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. Second, current capital structure may lower efficiency of the firm.

This evidence shows that shareholders are paying for this over-liquid and under-levered capital structure. In other words, it hurts the value of firm in the long run. They are not maximizing firm value by staying away from debt financing.

First, current payout policies directly increase payout ratio by issuing large amount of new shares. High payout ratio shows that the company has to spare a large amount of cash to pay dividends rather than invest in more profitable projects.

In addition, given that dividends per share climbed slightly, earnings per share dropped greatly from 1. Although riskier, debt financing helps company have a better financial structure and because Blaine Kitchenware refuses to do so, we agree that their capital structure and pay out policies are not the most appropriate for the firm.Blain Kitchenware, Inc.: Capital Structure In April , Blaine Kitchenware’s CEO was considering whether to recommend a share repurchase to the board of directors.

Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc. Essay Sample. Pages: 8; Word count: 1,; Advantages and disadvantages of large share repurchase proposal The large share repurchase should be recommended to Blaine’s board.

The followings are advantages of share repurchase. Evaluation on Share Repurchase Proposal of. Blaine Kitchenware Business Case Analysis. Uploaded by jen Related Interests. Share Repurchase; Consider the following share repurchase proposal: Blaine will use $ million of cash from its balance sheet and $50 million in new debt-bearing interest at the rate of 6.

its interest coverage and debt ratios.7% reduction of shares. Blaine Kitchenware Inc. Essay examples; Blaine Kitchenware Inc. Essay examples. Words Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc. Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc.

Evaluation on share repurchase proposal of blaine kitchenware inc. essay

Group 7 Contents Executive Summary 3 Overview of problems 3 Analysis on Capital Structure & Payout Policies of. Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc.

Evaluation on share repurchase proposal of blaine kitchenware inc. essay

Essay Sample. 1. 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.

Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc. Group 7 Contents Executive Summary 3 Overview of problems 3 Analysis on Capital Structure & Payout Policies of Blaine 3 1. Inappropriate current capital structure and payout policies 3 2.

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