Consider the following share purchase proposal: Blaine will purchase 14 million shares of its stock at a price of $18.50 per share. Current stock price is $16.25 per share and shares outstanding equal 59 million. Repurchase will be funded with: o $209 million cash from balance sheet (includes cash & cash equivalents as well as marketable securities) o $50 new debt issue at an interest rate of 6.75% What effect would the proposal have on Blaines balance sheet? Name and calculate three effects Calculate the effect of the proposal on Blaines earnings before taxes and net income. Assume a tax rate of 30.8%. Calculate the effect of the proposal on Blaines leverage and coverage ratios. (Total Assets/Equity, Times Interest Earned)

BLAINE KITCHENWARE Case Exhibit 1 Operating Results: Revenue Less: Cost of Goods Sold Gross Profit Less: Selling, General & Administrative Operating Income Plus: Depreciation & Amortization EBITDA 2005 307,964 220,234 87,731 27,049 60,682 8,213 68,895 2006 342,251 249,794 92,458 28,512 63,946 9,914 73,860 62,383 15,719 78,101 24,989 53,112 18,589 EBIT Plus: Other Income (expense) Earnings Before Tax Less: Taxes Net Income Dividends 2004 291,940 204,265 87,676 25,293 62,383 6,987 69,370 60,682 16,057 76,738 24,303 52,435 22,871 63,946 13,506 77,451 23,821 53,630 28,345 3.2% 30.0% 21.4% 23.8% 32.0% 18.2% 35.0% 5.5% 28.5% 19.7% 22.4% 31.7% 17.0% 43.6% 11.1% 27.0% 18.7% 21.6% 30.8% 15.7% 52.9% Margins: Revenue Growth Gross Margin EBIT Margin EBITDA Margin Effective Tax Rate (1) Net Income Margin Dividend payout ratio BLAINE KITCHENWARE Case Exhibit 2 Assets: Cash & Cash Equivalents Marketable Securities Accounts Receivable Inventory Other Current Assets Total Current Assets 2004 67,391 218,403 40,709 47,262 2,586 376,351 2005 70,853 196,763 43,235 49,728 3,871 364,449 2006 66,557 164,309 48,780 54,874 5,157 339,678 Property, Plant & Equipment Goodwill Other Assets Total Assets 99,402 8,134 13,331 497,217 138,546 20,439 27,394 550,829 174,321 38,281 39,973 592,253 Liabilities & Shareholders' Equity: Accounts Payable Accrued Liabilities Taxes Payable Total Current Liabilities Other liabilities Deferred Taxes Total Liabilities Shareholders' Equity Total Liabilities & Shareholders' Equity 26,106 22,605 14,225 62,935 1,794 15,111 79,840 417,377 497,217 28,589 24,921 17,196 70,705 3,151 18,434 92,290 458,538 550,829 31,936 27,761 16,884 76,581 4,814 22,495 103,890 488,363 592,253