Assume that Blaine Kitchenware CEO Victor Dubinski has made the following share repurchase proposal to Blaine$$s board of directors:

Blaine will use $$209$ million of cash from its balance sheet and $$50$ million in new debt$-$bearing interest at the rate of $6\mathrm{.}75\%$ to repurchase $14\mathrm{.}0$ million shares at a price of $$18\mathrm{.}50$ per share.

You have subsequently been hired as a consultant by the members of Blaine$$s board of directors to assess the advantages and disadvantages of this proposal and to provide a recommendation to the board about whether or not to approve this proposal. Write a brief report providing your recommendation, answering the following questions along the way:

$1.$ Do you believe Blaine$$s current capital structure and payout policies are appropriate? Why or why not? $($For this question, think especially about the combined implications for Blaine of the lessons of Chapters $14$ and $15,$ noting with regard to Chapter $15$ that the approximately $$200$ million in interest$-$bearing marketable securities that Blaine holds, together with their resultant $$16$ million or so in taxableinterest income $($in contrast to interest expense, which would be tax deductible$)$ could be viewed from a Miller and Modigliani perspective as a $$negative tax shield.$)$