1.Do you believe Blaine’s current capitalstructure and payout policies are appropriate? Why or why...

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1.Do you believe Blaine’s current capitalstructure and payout policies are appropriate? Why or why not?2.Should Dubinksi recommend a large sharerepurchase to Blaine’s board? What are the primary advantages and disadvantagesof such a move?3.Consider the following share repurchaseproposal: Blaine will use $209 million of cash from its balance sheet and $50million in new debt-bearing interest at the rate of 6.75% to repurchase 14.0million shares at a price of $18.50 per share. How would such buyback affectBlaine? Consider the impact on, among other things, BKI’s earnings per shareand ROE, its interest coverage and debt ratios, the family’s ownershipinterest, and the company’s cost of capital.4.As a member of Blaine’s controlling family,would you be in favor of this proposal? Would you be in favor of it as anon-family shareholder?

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Q1: 
I don't think Blaine's Kitchenware Inc's existing capital structure & payout practises are the best. With the exception of twice in its existence, the firm's structure invests primarily in equity, never taking on debt. Although the business initially seemed to take pride in not taking on debt, it is now clear that this has long-term effects on the company's worth.
Whether they believed that reducing debt would reduce their risk or otherwise, the truth remains that by avoiding debt financing, they are not fully maximising the value for their company. Debt financing will cut the cost of capital mainly because of the reduction in taxes, even if risk will rise as debt levels rise. By being so cautious with its financing, the company will never attain its full potential, which will have an impact on their payout policies for shareholders and stockholders.
Due to their net income and book equity, returns to shareholders have been a little below average. Thus, Blaine's ROE in 2006 became significantly lower than those of its competitors. Since their returns being lower than others', this poses a serious challenge for the company and lowers its perceived value to outsiders.
Q2: 
Dubinski ought to suggest to Blaine's board a significant share repurchase for a number of good reasons. The primary cause is that Blaine's Kitchenware's Business is underleveraged and overliquid. Following the first public offering in 1994, the founders' family received 62 percent ownership of the company. The value of the stockholders has decreased over time as a result of the corporations' acquisitions of small, independent manufacturers, which were partially funded by BKI stock rather than cash. In the beverages appliance category, which BKI was lacking, these purchases have been beneficial in that they have generated tremendous growth. Blaine's top line growth can be nearly entirely ascribed to these acquisitions. The effects of these new purchases include dilution of shareholder value, a large decline in earnings per share as a result of these dilutive acquisitions, and below-average shareholder returns.
Blaine had an extremely cautious financial stance because they had only twice borrowed money over their seasonal working capital requirements. Despite the company's historically conservative traditions, it's critical that they understand the necessity of obtaining leverage and stock buybacks.

1. Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? 2. Should Dubinksi recommend a large share repurchase to Blaine’s board? What are the primary...

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