Blaine Kitchenware,

Inc. (case study)

1. Do you believe Blaine's current capital structure and payout policies are appropriate?

2. Should Dubinski recommend a large share repurchase to Blaine's board? What are the primary advantages and disadvantages of such a move?

3. Consider the following share repurchase proposal:

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.

How would such a buyback affect Blaine? Consider the impact on, among other things, Blaine's EPS and ROE, its interest coverage and debt ratios, the family's ownership interest, 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 a non-family shareholder?