Blaine kitchenware. Blaine Kitchenware Inc. Essay examples 2022-10-12

Blaine Kitchenware

Now that integration activities were completed, BKI executives expected the firm to achieve operating margins at least as high as its historical margins. In recent years, Blaine had been expanding into foreign markets. Unlike all the different …show more content… Return on Equity increased from 10. The chart 1 and 2 in the Appendix 3 show a comparison of dividend per share and annual compound return on share before and after the stock repurchase using debt. A summary of contemporaneous financial market information is provided in Exhibit 4. Dividends per share had risen only modestly during 2004—2006; however, as the company issued new shares in connection with some of its acquisitions, the number of shares outstanding climbed, and the payout ratio rose significantly, to more than 50% in 2006. PE ratio fell as a result of the leverage.

Blaine Kitchenware: Case Study: Blaine Kitchenware Case

How many shares could be bought? This effect could be magnified if the management believes that the company is already overvalued. Other liabilities and deferred taxes however, may decrease marginally. Recommendation for repurchase From the analysis, it is recommended that Blaine should consider a large portion of share repurchase because it would allow managing the capital structure and financial policies of the company by balancing its debt and equity. . For instance, if the tax on dividends is higher than the tax on capital gains, the shareholders might experience higher after-tax gains from a share repurchase. An engineer by training, Dubinski served in the U.

Blaine Kitchenware, Inc.: Capital Structure Case Study Solution for Harvard HBR Case Study

The inclusion of debt would decrease the tax obligations and improve the earnings quality. Although with increasing debt, the risk also increases; but due to tax reduction on interest of debt, the cost of capital would actually be lower. After his discharge, he worked for a large aerospace and defense contractor until joining the family business in 1981 as head of operations. Moreover, the company would be able to achieve an annual compound return of 16% over shares at the end of the 5 th year in case of stock repurchase which is equals to the rate of returns its peers offering in the market. Moreover, the stocks of the company are highly priced in the stock market as compared to its peers. As debt is more secure security than shares, due to the fixed amount of interest paid on debt, the required rate of return on debt is always less than the required rate of return on shares.

Blaine Kitchenware Inc. Essay examples

Second, beginning in the 1990s, Blaine gradually moved its production abroad. BKI plans repurchase its own shares. Customer-Centric Pricing: The Surprising Secret for Profitability Major Current Challenges in Emerging Economies Democracy in Zimbabwe: The Presidential Bid of Morgan Tsvangirai Kansas City Zephyrs Baseball Club, Inc. Otherwise, however, Blaine, like most companies in the appliance industry, outsourced its production. Such a repurchase might not be considered optimal. Dubinski knew the family had no current interest in selling—on the contrary, Blaine was interested in acquiring other companies in the kitchen appliances space—so this overture, like a few others before it, would be politely rebuffed.

Blaine Kitchenware, Inc. Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

. The asset multiplier increases with the increase in debt to equity ratio, which has increased from zero to 22. First, the company completed an IPO in 1994. However, the company has also issued a substantial amount of shares in the past three years in order to fund its acquisitions. How well is the company performing? The increase in debt also hindered the company's current ratio and interest coverage ratio as time went on. This ratio is high. This gave Blaine, when unlevered, a WACC of 7.

Blaine Kitchenware Case Study Solution and Case Analysis

Both paying dividends and repurchasing shares reduces Wrigley's equity. The company is responsible to pay interest even if it has a net loss in the fiscal year. However, the special dividend does not lead to a reduction in outstanding shares. The company was particularly keen to increase its presence in the beverage appliance segment, which demonstrated the strongest growth and where BKI was weakest. . Net income growth: Another benefit of the high leverage in the growing businesses is the net income growth. Blaine might have to buy the shares at a premium if shareholders are not willing to sell at the market price.

Blaine Kitchenware, Inc.: Capital Structure

In 2006 BKI had suppliers and contract manufacturers in China, Vietnam, Canada, and Mexico. First, equity decreases because current assets cash are reduced. . The book value of equity is also expected to change due to the repurchase program. It is expected that a significant portion of the increase in return of equity can be explained by looking at the increase in asset multiplier ratio - a component of the Du-Pont equation. . As, interest is deducted before the payment of taxes in the income statement, this deduction allows potential amount of tax saving which is equals to the amount of interest paid times the tax rate.

It could be seen from the charts that the dividends per share and the annual return on share are high in case of stock repurchase through debt. Increase in Fixed Costs: Another major cost of higher leverage is the fixed amount of interest that is to be paid by the company annually. . The company operates in a competitive environment and needs to invest its profits in profitable opportunities in order to maintain its competitive edge. What are the primary advantages and disadvantages of such a move? Additionally, it would lead to an increase in the ownership for the shareholders.

LinkedIn Blaine Kitchenware, Inc. In a relatively short period of time a walnut distributor had taken the snack segment by storm and was poised to make a multi-billion dollar bid for Pringles. Family interests were strongly represented on the board of directors as well. Thus, the dividend payout ratio would grow by a decrease in the outstanding shares. The decision to remain unlevered might have been popular for its conservatism in the earlier part of the twentieth century.