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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The debt capital has been procured at very less cost when compared to equity and hence the WACC has reduced from Following is kitchrnware operating results for the year when the capital structure is levered and unlevered.
Although this will involve the company raising a significant debt, this will also give them complete control to the promoters.
Since they are totally equity financed, there is no tax shield. Cost of capital when the company is unlevered Ke Moreover, the ownership percentage of family has also increased and hence resulting in the more dominant position in the company.
According to their current situation we do not think their current capital structure and payout policies are appropriate. 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. Cost of capital when the company is unlevered Dividend per share D1 0.
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:. Joel Heilprin ; Timothy A Luehrman. Net worth in Register Submit to us Case writing resources Case writing scholarships How to submit your case Online case submission Why submit your case to us? The company must determine the optimal debt capacity and capital structure, and subsequently estimate the resulting change in firm cwse and stock price.
Using a perfect leverage is always beneficial for a company as it allows to decrease the cost of capital.
Medicine essays Miscellaneous essays Psychology essays Religious studies essays Science essays Sociology essays Essays menu. 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.
However, the company must guard itself from getting over-levered. Why or why not? This is not a very healthy situation for a public company as the interest of the minority shareholders are sometimes not taken care of.
There is a big question facing Blaine and that is why would their existing shareholders want to sell their equity back to the company?
Other Income expense 13, 13, Less: Teaching note supplement software. Any orders placed during this time will be dealt with when we open again on 2nd January. In summary, in order for Blaine to keep its current payout policies, they must reduce numbers of outstanding shares throughout share repurchasing. Essay UK – http: View our pricing guide or login to see prices.
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. There are UK writers just like me on hand, waiting to help you. The Case Centre is a not-for-profit company limited by guarantee, registered in England No and entered in the Register of Charities No Please find below kitchenwaare full details of the product you clicked a link to view.
The payout ratio of the company has been increasingly increasing for the past three years. Accounting essays Architecture essays Business essays Coursework Economics essays Education essays Engineering essays English language essays English literature essays. Blaine kitchensare currently over-liquid and under-levered and their shareholders are suffering from the effects. Finance, Accounting and Control. It is evident that studyy cost of capital has reduced when fase company decided to go for share kigchenware using the surplus cash and debenture issue.
Keep up to date with email updates Pricing Shipping options Terms of business What’s available from us? 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 kitchenwars decrease the enterprise value of Blaine. About this resource This Business essay was submitted to us by a student in order to help you with your studies.
Interest 0 Earnings Before Tax 77, 74, Less: We are completely closed on Tuesday 1st January.
Go to advanced search. Acquirers could kjtchenware way less than they originally expect to buy out the firm.
However, concluding whether an unlevered or a levered capital structure is appropriate for a company largely depends on the industry debt equity ratio i.
Each of us is qualified to blainee high level in our area of expertise, and we can write you a fully researched, fully referenced complete original answer to your essay question. What are the primary advantages and disadvantages of such a move? This page has approximately words. We have not been given the seperate data for equity share capital and Retained Earnings.
The return on equity will increase which will aid the family in better realizing value for their stake. Our work is high quality, plagiarism-free and delivered on time. 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. How would such a buyback affect Blaine? In other words, Blaine does not fully utilize its funds.