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Homework answers / question archive / I got a following homework
I got a following homework. I would like to know similar cases which I can refer to proceed this homework. I also would like to know the textbook or papers which are useful in this homework. Thank you in advance for your advice. Best Regards, ----------------------------------------------------------------- Case Blaine Kitchenware, Inc. Blaine Kitchenware, Inc. is an all-equity cash-rich company considering the following change in capital structure: borrow $50 millions at an interest rate of 6.75% use the loan together with $209 millions of its own cash to repurchase 14 millions shares at the current market price of $18.50/share Currently, the (market value) balance sheet and the income statement of Blaine Kitchenware, Inc. are as follows (expressed in $ thousands) : Assets Cash $230,866 Other Assets $257,497 Total $488,363 Liabilities Debt $0 Equity $488,363 Total $488,363 Revenue $346,366 Less: Cost of Goods Sold $249,794 Gross Pro?t $92,458 Less: Selling, General & Administrative Expenses $28,512 EBIT $68,060 Earnings Before Tax $68,060 Less: Taxes $23,821 Net Income $44,239 Dividends $28,345 Questions: 1. Create the pro-forma balance sheet and income statement taking into account the proposed change in the capital structure, assuming the tax regime and payout policy (in terms of percentage of net income paid out as dividends) remain unchanged 2. Calculate the dividends per share for the current and proposed capital structure and discuss how capital structure a?ects the cash ?ows to shareholders 3. Discuss the bene?ts and costs of higher leverage 4. What are the costs of ?nancial distress of Blaine Kitchenware, Inc. before the proposed share repurchase? How do you expect them to change with leverage? Why?
