The focus of this case is to understand how leverage should affect beta and the impact of different levels of debt on the WACC. In the end you are providing a recommendation to Blaine insiders to help them make an informed decision on a stock repurchase proposal so as to reach an optimal capital structure. Please consider addressing the following questions in your summary:
Suppose that Blaine’s investment bankers proposed using $209 million of cash from the balance sheet and $50 million of new debt to repurchase 14.0 million shares at $18.50, a premium to the current price.
i) Should Mr. Dubinski recommend this repurchase proposal to the Board of Directors? If so, is that the optimal amount of debt to issue? Or, should they take on more debt and buy back more shares? (What does your analysis on WACC imply about Blaines optimal capital structure?)
ii) With your suggested repurchase plan (take debt to buy back shares), you also need to find the Break-Even EBIT to check if your proposed capital structure change (add debt to buy back stock) is feasible.
You will submit TWO files to this Assignment: the Excel file containing the WACC worksheet, and the one-page Executive Summary with 12 font and normal margins. Be sure to retain the original Excel formatting so that I may click on each cell to determine its derivation.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more