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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In summary, in order for Blaine to keep its current payout policies, they must reduce numbers of outstanding shares throughout share repurchasing. The company has been earning profit and it should seek and endeavor further growth opportunities instead of returning it back to shareholders. The Case Centre is a not-for-profit company limited by guarantee, registered in England No and entered in the Register of Charities No 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.
The debt capital has been procured at very less cost when compared to equity and hence the WACC has reduced from Using a perfect leverage is always beneficial for a company as it allows to decrease the cost of capital. The management should use the available cash and invest in attractive investments. Blaine has an unlevered capital structure currently i. 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.
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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.
Register Submit to kitchebware Case writing resources Case writing scholarships How to submit your case Online case submission Why submit your case to us? According to their current situation we do not solurion their current capital structure and payout policies are appropriate. Would you be in favor of it as a non-family shareholder?
The return on equity will increase which will aid the family in better realizing value for their stake. The justification can be drawn from the diminishing returns for the last three years.
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. There is a big question facing Blaine and that is why would their existing shareholders want to sell their equity back to the company? You can change your cookie settings at any time but parts of our site will not function correctly without them. Since Blaine Kitchenware is a public company with large portion of its shares held by their family members, they have a financial surplus, which decreases the efficiency of its leverage.
Just complete our simple order form and you could have your customised Business work in your email box, in as little as 3 hours. Their management will have increased stakes, this will reduce their chance of being acquired and this will provide more dividends to their remaining shareholders. Essay UK – http: 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. 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 capital structure instead of having a completely unlevered one as it would have affected the cost of capital of the company.
Essay: Blaine’s Kitchenware – Essay UK Free Essay Database
View our pricing guide or login to see prices. This page has approximately words. We are completely closed on Tuesday 1st January. Zolution, the ownership percentage of family has also increased and hence resulting in the more dominant position in the company. Blaine is currently over-liquid and under-levered and their shareholders are suffering from the effects.
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Tax ID No Since they are totally equity financed, there is no tax shield. Following is the operating results for the year when the capital structure is levered and unlevered. 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. Net worth in Accounting essays Architecture essays Business essays Coursework Economics essays Education essays Engineering essays English language essays English literature essays.
If this essay isn’t quite what you’re looking for, why not order sollution own custom Business essay, dissertation or piece of coursework that answers your exact question? 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.
Attention is also given to the value of interest tax shields. However, concluding whether an unlevered or a levered capital structure is appropriate for a company largely depends on the industry debt equity ratio i. Why or why not? Go to advanced search.
Joel Heilprin ; Timothy A Luehrman. Registered Data Controller No: Other Income expense 13, 13, Less: The payout ratio of the company has been increasingly increasing for the past three years. Finance, Accounting and Control.
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It 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.
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.
All fields Reference no. Dividend payout ratio 0.