Question:FINANCIAL MANAGEMENT II

Homework 2 – Capital structure 

Due by 11:59 p.m. on Thursday, October 19, 2017

Write up an Executive Summary of the Blaine Kitchenware case

The homework assignment is based on the discussion that took place in class on Thursday, October 12th. I would like your team to write t his up in a cooperative fashion. This ES should be written as a professional memo from Victor Dubinski to the Board of Directors. The ES should be one to 1.5 t o 2 p-a-g-e-s in length (1.5 spacing), plus supporting spreadsheet work. Thus, the total ES (including supporting spreadsheets) may be three to four pages (approximately). PLEASE make sure to format the entire ES (including spreadsheets) so it can be printed and read as a hard copy. I would prefer the ES be submitted as a single Word file, with spreadsheet work pasted in. I will, however, accept the spreadsheet work as a separate Excel file, just make sure to label the filename clearly. 

The write up should address the key points of the questions we discussed during class discussion:

• Do you think Blaine’s current capital structure and payout policies are appropriate? Why or why not? 
• Should Dubinski recommend a large share repurchase to Blaine’s board? What are the primary advantages and disadvantages of such a move? Suppose the banker recommends that Blaine borrows $50 million at an interest rate of 6.75%, and use the loan proceeds plus $209 million of its cash and securities to purchase (in a self-tender) 14 million shares at $18.50/ share. Given just over 59 million shares outstanding and a current stock price of $16.25, the proposal involves paying a 13.8% premium to buy back 23.7% of the outstanding shares. What are the pros and cons of such an offer from the perspective of Blaine, and thus Victor? 
• Are you supportive of this type of offer, in general? What effect does the proposal have on Blaine’s balance sheet and how are balance sheet leverage ratios affected? How does the proposal effect Blaine’s income statement and how are interest coverage ratios (such as EBITDA/interest) affected? Do these ratios strike you as manageable for Blaine?
• 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 member?  
• Say a member of the Blaine board questions the proposal (in Q1) and asks why not just pay a large special dividend of say, $4.39 per share? How would you respond to this counter proposal?
• How does the proposed repurchase create value for Blaine, or does it? Think about this in terms of the interest-­‐tax shield (i.e., M&M).
• How does the static tradeoff model apply here? Do the agency costs or the pecking‐order model have any relevance here?

However, the ES should not enumerate these questions, nor any directed questions provided for guidance in case preparation. Instead, as mentioned, the format of ES should be that of a professional memo. Note that the most important key issues are those covered in the class discussion. Finally, you only have two pages for the write up, use that space to analyze the problem rather than to provide background or review established facts in the case. Assume the members of the Board are familiar with the problem but are looking to you for analysis and advice. This ES should be included along with your answers to the optimal capital structure problem from the textbook. 

the discussion topic is “Are the financial statements that are being reported are incorrect, because they are only used by investors”

I simply need my personal opinion .( personally, i agree that financial statement should be correctly reported by stakeholders.)

It takes 2 hours of direct labor to produce a carving. Bartels” standard labor cost is $12 per hour. During August, Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376. What is Bartels” labor rate variance for August? Bradford Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials quantity variance and the direct materials price variance?

One of the tropes of our cultural mythology is that a man wearing a dress is funny and generally humiliating–something one would do only if desperate. Does this desperation cause Thor’s response to the theft of his hammer?

Why is a woman in a men’s clothing not funny at first glance in the same way?

Are women inherently funny because we are feminine? 

Or is masculine “normal” and feminine is “other”?

Here are some comedy examples of men dressed as women:

• To Wong Fu: Thank you very much, Julie Newmar: starred Patrick Swazy, Wesley Snipes and John Leguizamo
• Tootsie: starred Dustin Hoffman
• Some like it Hot: starred Tony Curtis, Jack Lemmon, and Marilyn Monroe.
• Just one of the Girls: started Corey Haim
• The Birdcage: starred Robin Williams, Nathan Lane and Gene Hackman
• Mrs. Doubtfire: starred Robin Williams
• White Chicks starred Marlon Wayans and Shawn Wayans

This controversy came out in a creative session on a cartoon show for adults–could they make fun of a woman getting splattered with dog drool? Would be be as funny as if it were a male character? 

B. F. Goodson employs Eduardo Gonzales at a salary of $46,000 a year. Goodson is subject to employer Social Security taxes at a rate of 6.2% and Medicare taxes at a rate of 1.45% on Gonzales’s salary. In addition, Goodson must pay SUTA tax at a rate of 5.4% and FUTA tax at a rate of 0.6% on the first $7,000 of Gonzales’s salary.

Compute the total cost to Goodson of employing Gonzales for the year. 

Computation of the total cost to Goodson of employing Gonzales for theyear.Gross wagesEmployer Social Security tax, 6.2% of $46,000Employer Medicare tax, 1.45% of $46,000State unemployment…