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 company has been earning profit and it should seek and endeavor further growth opportunities kithcenware of returning it back to shareholders. Why or why not? 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.

This is not a very healthy situation for a public company as the interest of the minority shareholders are sometimes not taken care of. Finance, Accounting and Control. Attention is also given to the value of interest tax shields.

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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. This shows that the company has been keen on less retention of money to further invest.

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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.

The payout ratio of the company has been increasingly increasing for the past three years. Order a custom essay Print this page Search again Word count: If this baline isn’t quite what you’re looking stucy, why not order your own custom Business essay, dissertation or piece of coursework that answers your exact question?

Cost of capital when the company is unlevered Ke The debt capital has been procured at very kltchenware cost when compared to equity and hence the WACC has reduced from Other Income expense 13, 13, Less: However, the company must guard itself from getting over-levered. All fields Reference no. They also have to consider of the effect of the repurchase on various factors like the risks involved in raising a debt especially when they are large, very conservative and debt free.

The justification can be drawn from the diminishing returns for the last three years.

Interest 0 Earnings Before Tax 77, 74, Less: Essay UK – http: Dividend payout ratio 0. Since they are totally equity financed, there is no tax shield. 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. Accounting essays Architecture essays Business essays Coursework Economics essays Education essays Engineering essays English language essays English literature essays.

You can change your cookie settings at any time but parts of our site will not function correctly without them. Registered Data Controller No: Would you be in favor of it as a non-family shareholder? The company must determine the optimal debt capacity and capital structure, and subsequently estimate the resulting change in firm value and stock price. 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.

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Although this will involve the company raising a significant debt, this will also give them complete control to the promoters. 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:.

Moreover, the ownership percentage of blaime has also increased and hence resulting in the more dominant position in the company.

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About this resource This Business essay was submitted to us by a student in order to help you with your studies. My account New to The Case Centre? 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. Essay UK offers professional custom essay writing, dissertation writing and coursework writing service. Another scenario is to completely buy-back the market float.