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jok3333 [9.3K]
4 years ago
11

Consider the following share repurchase proposal: Blaine will use $209 million of cash (and marketable securities) from its bala

nce 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?
Business
1 answer:
rjkz [21]4 years ago
7 0

Answer:

a) Income statement

Net income will decrease due to interest expense

interest expense ( $50,million * 5.88%)  = $2,940,000

Balance sheet

Assets

Bank will decrease by the $209 million

Equity and liabilities

Equity

Stock outstanding will decrease in both numbers( 14.0 million shares) and in amount ($ face value or par)

Retain earnings will decrease by gain(loss) on repurchase of stock

b) -The EPS

The EPS will increase( decrease outstanding share) and it is a positive change, but changes in earnings will decide the change in EPS ultimately.

-ROE

ROE increases and it is a positive change, the higher the ROE the higher the attraction on investors and it is positive.

Interest coverage

Interest coverage will decrease due to the new interest expense added by the loan taken and this is negative.

Debt Ratio

The debt ratio will increase meaning more debt is used to fund assets and the increase is negative.

c) Since the ROE and EPS will increase then Blaine is doing good but with a debt risk now it will depend on the expectations of the investor and his risk appetite, but if judging by ROE then it is doing good.

d) If i was a family member i would not accept the proposal, taking on debt and using so much funds from the business to fund repurchase of shares, no this could leave the business with difficult times.

If I was a shareholder and not family, i would accept as my share price would increase hence returns

Explanation:

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Answer:

Part A. The amount of purchases budgeted for July is calculated below:

Amount of purchases = Cost of goods sold + Closing inventory - Opening inventory  

Amount of purchases = ($320,000 x 1.09) + $34,000 - $33,000

Amount of purchases = $348,800 + $34,000 — $33,000

Amount of purchases = $349,800

Therefore, the amount of purchases budgeted for July is $349,800.

Part B. The amount of cash payments budgeted for inventory purchases in July is calculated below:

Amount of cash paid in July = Opening accounts receivable + 75% of purchases in July

Amount of cash paid in July = $37,000 + ($349,800 × 0.75)

Amount of cash paid in July = $37,000 + $262,350

Amount of cash paid in July = $299,350

Therefore, the amount of cash paid in July is $299,350.

8 0
3 years ago
How can verbal feedback affect customer encounters? Give 3 real lifelexamples. (good or bad) Follow the​
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Explanation:

Example 1: the numeric NPS response

Everyone loves a handy dandy NPS survey. They give you an easy glimpse into how your customers are thinking about your brand or your business, and quantify just how happy they are with your services.

But, not all NPS surveys or responses are created equal.

Let’s say your business sends out an NPS survey to a random sample of customers. Of that sample, 65% are promoters (and gave you a 9-10 rating), 25% are neutral (a 7-8 rating), and 10% are detractors (a 0-6 rating). Of that sample, only a handful of the promoters wrote feedback about why they picked the score they did. The rest simply clicked a number and then went about their day.

Where do you go from here? How can you convert those neutral customers into promoters, and raise the bar for the detractors to bring them closer to your ideal score without written feedback?

NPS is helpful, but only when it gives you a clear picture of what your customer was thinking and provides tangible feedback you can incorporate into your organization.

Example 2: a “yes” or “no” response to an FCR survey

Now, let’s say every time a customer creates a Support ticket, your organization sends an automated First Contact Resolution survey once the ticket is closed.

Most often, a FCR survey is just one question – Were we able to help you resolve your issue? – with a simple “yes” or “no” response.

Receiving a “yes” is, of course, great – it means your agents were able to help your customer get to the bottom of their issue and helped make their day a little better. Receiving a “no,” on the other hand, is the exact opposite; it means your agents weren’t able to successfully meet the needs of your customer, and they’ve been left frustrated by the experience, with their issue still unresolved.

So what happens after a “no”?

Depending on what you use to capture FCR. it could be nothing. “No” responses are simply filed away in a folder, maybe you ping your agents to get more context on the particular issue, and everyone pretends it didn’t happen.

If you want to turn those “no” responses into actionable customer feedback, however, it’s crucial to have tools for your business like Service Recovery.

With Service Recovery, you have the ability to flag any “no” responses and fire off a follow-up survey to your customer, get more clarity from them on how you missed the mark, and dig in deeper to resolve their issue.

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8 0
2 years ago
Total costs are $180,000 when 10,000 units are produced; of this amount, variable costs are $64,000. What are the total costs wh
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I think it would be C
5 0
3 years ago
Futura Company purchases the 69,000 starters that it installs in its standard line of farm tractors from a supplier for the pric
algol13

Financial advantage (disadvantage) of making the 40,000 starters instead of buying them from an outside supplier is: $89,700.

<h3>Financial advantage (disadvantage)</h3>

First step is to calculate the relevant cost of making starters

Relevant cost= Direct materials+ Direct labor+ Variable manufacturing overhead+ Supervision

Relevant cost=($4×69,000)+ ($3.20×69,000) +($0.60×69,000) + $117,300

Relevant cost=$276,000+$220,800+$41,400+$117,300

Relevant cost=$655,500

Second step is to calculate the relevant cost of buying starters

Relevant cost=$10.80 × 69,000

Relevant cost=$745,200

Third step is to calculate the financial advantage

Financial advantage=$745,200-$655,500

Financial advantage=$89,700

Therefore the financial advantage is $89,700.

Learn more about Financial advantage (disadvantage) here:brainly.com/question/16288548

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3 years ago
Crane Company purchased $1080000 of 8%, 5-year bonds from Swifty, Inc. on January 1, 2021, with interest payable on July 1 and J
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Answer: $27,864

Explanation:

The amount that should be recorded as other comprehensive income is the fair value less the sales price and the amortized premiums to reflect the true value of the investment,

= 1,164,000 - 1,129,896 - 3,048 - 3,192

= $27,864

$27,864 is the amount Crane Company should report as other comprehensive income and as a separate component of stockholders’ equity.

6 0
4 years ago
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