Assume that Blaine Kitchenware CEO Victor Dubinski has made the following share repurchase proposal to Blaines 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 75 to repurchase 14 0 million shares at a price of $18 50 per share You have subsequently been hired as a consultant by the members of Blaines 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 accept this proposal Write a brief report providing your recommendation, answering the following questions along the way Do you believe Blaines 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 taxable interest 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 ) In general, what are the key advantages and disadvantages of large share repurchases such as the one that Victor Dubinski is proposing Given the overall size and market capitalization of Blaine Kitchenware, would Dubinskis proposed share repurchase be considered a large one What would be the effect of Dubinskis specific share repurchase proposal (described in the top paragraph above) on Blaine Kitchenware Consider the impact of this proposal on, among other things, BKIs earnings per share and ROE, its interest coverage and debt ratios, the familys ownership interest, and the companys weighted average cost of capital Given these effects, what would your recommendation be for board members who belong to Blaines founding family, regarding whether they should be in favor of this proposal Why What factors do you think are important to consider in making this recommendation Would your recommendation be different for non family board members If so, why What would make the difference, if there is one Note that the case takes place in April 2007 Would the events of the 14 years since then, including, e g , the Great Recession and the various supply chain and other economic impacts of the current coronavirus pandemic, affect your recommendations If so, why, and in what ways If not, why not

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Assume that Blaine Kitchenware CEO Victor Dubinski has made the following share repurchase proposal to Blaines board of directors: Blaine will use $209 million of

Assume that Blaine Kitchenware CEO Victor Dubinski has made the following share repurchase proposal to Blaines 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 6.75% to repurchase 14.0 million shares at a price of $18.50 per share.

You have subsequently been hired as a consultant by the members of Blaines 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 accept this proposal. Write a brief report providing your recommendation, answering the following questions along the way:

Do you believe Blaines 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 taxable interest 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.)
In general, what are the key advantages and disadvantages of large share repurchases such as the one that Victor Dubinski is proposing? Given the overall size and market capitalization of Blaine Kitchenware, would Dubinskis proposed share repurchase be considered a large one?
What would be the effect of Dubinskis specific share repurchase proposal (described in the top paragraph above) on Blaine Kitchenware? Consider the impact of this proposal on, among other things, BKIs earnings per share and ROE, its interest coverage and debt ratios, the familys ownership interest, and the companys weighted average cost of capital.
Given these effects, what would your recommendation be for board members who belong to Blaines founding family, regarding whether they should be in favor of this proposal? Why? What factors do you think are important to consider in making this recommendation?
Would your recommendation be different for non-family board members? If so, why? What would make the difference, if there is one?
Note that the case takes place in April 2007. Would the events of the 14 years since then, including, e.g., the Great Recession and the various supply chain and other economic impacts of the current coronavirus pandemic, affect your recommendations? If so, why, and in what ways? If not, why not?