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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The Case Centre is dedicated to advancing the case method worldwide, sharing knowledge, wisdom and experience to inspire and transform business education across the globe. Moreover, the ownership percentage of family has also increased and hence resulting in the more dominant position in the company. Since they are totally equity financed, there is no tax shield.

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This shows that the company has been keen on less retention of money to further invest. Any orders placed during this time will be dealt with when we open again on 2nd January. The management should use the available cash and invest in attractive investments. 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.

Using a perfect leverage is always beneficial for a company as it allows to decrease the cost of capital. Following is the operating results for the year when the capital structure is levered and unlevered. Access this item You must be logged in to access preview copies. Our work is high quality, plagiarism-free and delivered on time. Other Income expense 13, 13, Less: Finance, Accounting and Control.

Just complete our simple order form and you could have your customised Business work in your email box, in as little as 3 hours. Another scenario is to completely buy-back the market float. There is a big question facing Blaine and that is why would their existing shareholders want to sell their equity back to the company?

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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.

The company has been earning profit and it should seek and endeavor further growth opportunities instead of returning it back to shareholders. There are UK writers just like me on hand, waiting to help you. 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.

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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. Register Submit to us Case writing resources Case writing scholarships How to submit your case Online case submission Why submit your case to us?

In other words, Blaine does not fully utilize its funds. Accounting essays Architecture essays Business essays Coursework Economics essays Education essays Engineering essays English language essays English literature essays.

Seeing the industry debt equity ratio, the company has kept itself unlevered and this was a bit costly as the cost of debenture is fast cheaper if we compare it with the cost of equity. My account New to The Case Centre? Blaine has an unlevered capital structure currently i.

Registered Data Controller No: The debt capital has been procured at very less cost when compared to equity and hence the WACC has reduced from Dividend payout ratio 0. It is a form of returning the money back to shareholders and the shareholders who are out there ktichenware investment purposes feel it a better option to stay their money invested in a growing company instead of receiving petty dividends. Acquirers could pay way less than they originally expect to buy out the firm.

By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them. The company has been earning less profits and hence kitchenwar is of the opinion of distributing the profits to shareholders instead of retaining it for further investments. We kltchenware not been given the seperate data for equity share capital and Retained Earnings.

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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:. How would such a buyback affect Blaine? You can change your cookie settings at any time but parts of our site will not function correctly without them. Net worth in 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.

BLAINE KITCHENWARE by Erin Parker on Prezi

Buyback of the shares using the surplus cash and issuing debentures is beneficial kihchenware the company as it will give some degree of leverage to the company. Attention is also given to the value of interest tax shields. 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.

According to their current situation we do not think their current capital structure and payout policies are appropriate. Teaching note supplement software.

Their management will have increased stakes, this will reduce their chance of being acquired and this will provide more dividends to their remaining shareholders. This is not a very healthy situation for a public company as the interest of the minority shareholders are sometimes not taken care of.

Cost of capital when the company is unlevered Dividend per share D1 0.