Blaine Kitchenware Case Study Answers 1. ABOUT THE COMPANY Blain Kitchenware, Inc. (BKI), founded in , is a mid-sized producer of. View Notes – Blaine Kitchenware Case from FIN at DePaul University. Blaine Kitchenware Questions: 1) Do you believe that Blaines current capital structure. ABOUT THE COMPANY. Blain Kitchenware, Inc. (BKI), founded in , is a mid- sized producer of small appliances for residential kitchens. BKI has an.
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There is a big question facing Blaine and that is why would their existing shareholders want to sell their equity back to the company?
BLAINE KITCHENWARE by Erin Parker on Prezi
The return on equity will increase which will aid the family in better realizing value for their stake. In summary, in order for Blaine to keep its current payout policies, they must reduce numbers of outstanding shares throughout share repurchasing.
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Medicine essays Miscellaneous essays Psychology essays Religious studies essays Science essays Sociology essays Essays menu. Since they are totally equity financed, there is no tax shield. Interest 0 Earnings Before Tax 77, 74, Less: Although this will involve the company raising a significant debt, this will also give them complete control to the promoters.
The company has been earning less profits and hence it is of the opinion of distributing the profits to shareholders instead of retaining it kitchenwage further investments. A surplus of cash lowers the return on equity and increases the cost of capital; also large amount of cash may offer cwse to acquirer to and also decrease the enterprise value of Blaine.
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Acquirers could pay way less than they originally expect to buy out the firm. 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.
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Debt being a cheap source of finance and given the industry standards confirming the availability of the debt as well as the conformity by the rivals in subscribing to the debt capital, it seems wise to have a levered kitchennware structure instead of having a completely unlevered one as it would have affected the cost of capital of the company.
The company has been earning profit and it should seek and endeavor further growth opportunities instead of returning it back to shareholders. The debt capital has been procured at very less cost when compared to equity and hence the WACC has reduced from Would you be in favor of it as a non-family shareholder?
Moreover, the ownership percentage of family has also increased and hence resulting in the more dominant position in the company. The payout ratio of the company has been increasingly increasing for the past three years.
The Case Centre is a not-for-profit company limited by guarantee, registered in England No and entered in the Sfudy of Charities No This shows that the company has been keen on less retention of money to further invest.
Blaine Kitchenware, Inc: Capital Structure | The Case Centre, for educators
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. Finance, Accounting and Control.
If you are the original author of this content and no longer wish to have it published on our website then please click on the link below to request removal:. Buyback of the shares using the surplus cash and issuing debentures is beneficial for the company as it will give some degree of leverage to the company. Essay UK – http: About this resource This Business essay was submitted to us by a student in order to help you with your studies.
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Using a perfect leverage is always beneficial for a company as it allows to decrease the cost of capital.
The justification can be drawn from the diminishing returns for the last three years. Our work is high quality, plagiarism-free and delivered on time. Other Income expense 13, 13, Less: