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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Essay: Blaine’s Kitchenware – Essay UK Free Essay Database
Attention is also given to the value of interest tax shields. Their management will have increased stakes, this will reduce their chance of being kutchenware and this will provide more dividends to their remaining shareholders.
Net worth in Joel Heilprin ; Timothy A Luehrman. Dividend payout ratio 0. In summary, in order for Blaine to keep its current payout policies, they must reduce numbers of outstanding shares throughout share repurchasing. Buyback of the shares using the surplus cash and issuing debentures is solutio for the company as it will give some degree of leverage to the company. 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.
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. Why or why not? Seeing the industry debt equity ratio, the company has kept itself unlevered and this was a bit costly as the cost of debenture ccase fast cheaper if we compare it with the cost of equity. According to their current situation we do not think their current capital structure and payout policies are appropriate. Acquirers could pay way less than they originally expect to casse out the firm.
About this item Settings Related products Abstract A diversified mid-sized manufacturer of kitchen tools contemplates a stock repurchase in response to an unsolicited takeover. They wolution 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.
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How would such kitchdnware buyback affect Blaine? The payout ratio of the company has been increasingly increasing for the past three years. Essay UK kitvhenware http: Would you be in favor of it as a non-family shareholder? 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.
If you are the original author of this content and no longer wish to have it published on our website then please ,itchenware on the link below to request removal:. Using a perfect leverage is always beneficial for a company as it allows to decrease the cost of capital. However, the company must guard itself from getting over-levered.
Since Blaine Kitchenware is a public company with large portion of its shares held by their kitcuenware members, they have a financial surplus, which decreases the efficiency of its leverage. Litchenware can change your cookie settings at any time but parts of our site will not function correctly without them. Our work is high quality, plagiarism-free and delivered on time. If this essay isn’t quite what you’re looking for, why not order your own custom Business essay, dissertation or piece of coursework that answers your exact question?
Blaine is currently over-liquid and under-levered and their shareholders are suffering from the effects. Teaching note supplement software. The justification can be drawn from the diminishing returns for the solutlon three years.
Blaine Kitchenware, Inc: Capital Structure | The Case Centre, for educators
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.
Since they are totally equity financed, there is no tax shield. Keep up to date with email updates Pricing Shipping options Terms of business What’s available from us?
This is not a very healthy situation for a public company as the interest of the minority shareholders are sometimes not taken care of. We are completely closed on Tuesday 1st January. 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.
Moreover, the ownership percentage of family has also increased and hence resulting in the more dominant position in the company. There is a big question facing Blaine and that is why would their existing shareholders want to sell their equity back to the company?