(15 Points) Consider the following share repurchase proposal: Blaine will use $209 million of cash (and marketable securities) from its balance sheet and $50 million in new interest-bearing debt at the rate of 5.88% to repurchase 14.0 million shares at a price of $18.50 per share. a. Restate the income statement and balance sheet for 2006 showing the effect of adding debt. b. Consider the impact on, among other things, Blaine’s earnings per share, ROE, interest coverage (TIE), and debt ratio. How will these change, and are these changes positive for the shareholders? c. How does Blaine compare to competitors after the repurchase? d. 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?
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(15 Points) Consider the following share repurchase proposal: Blaine will use $209 million of cash (...
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