Blaine Kitchenware, Inc. is an all-equity cash-rich company considering the following change in capital structure: borrow

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Question:

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 Liabilities Cash $230,866 Debt $0

Other Assets $257,497

Equity $488,363

Total $488,363

Equity $488,363

Revenue $346,366

Less: Cost of Goods Sold $249,794

Gross Profit $96,572 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 1

Questions: .

Calculate the dividends per share for the current and proposed capital structure and discuss how capital structure affects the cash flows to shareholders. please explain how to calculate dividends?