Chat with us, powered by LiveChat Blaine Kitchenware, Inc.: Capital Structure - STUDENT SOLUTION USA

  1. Should Dubinski recommend a large share repurchase to Blaines board? What are the primary advantages and disadvantages of such a move? 

2. Consider the following share repurchase proposal: Blaine will use $209 million of cash from its balance sheet and $50 million in new debt bearing at an interest rate of 6.75% to repurchase 14.0 million shares at a price of $18.50 per share. How would such a buyback change Blaines: 

a. Debt ratio? 

b. Interest coverage ratio? 

a. Earnings per share? 

3. Calculate the incremental value to Blaines shareholders in terms of interest tax shields from the proposed recapitalization in #2 above. Ignore personal income taxes for your analysis. 

4. As a member of Blaines controlling family, would you be in favor of the proposed recapitalization in #2 above? Would you be in favor of it as a non-family shareholder?

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