Respuesta 3 Caso Blane
Blaine Kitchenware is issuing stock to raise money for their business. BKI plans repurchase its own shares. This means BKI plans to invest into its own company. The company’s main issue is the fact that it is over liquid and under-levered and whether to distribute cash to shareholders by buying back shares or paying dividends. The answer is easy as this; BKI has to spend money to make money. Lucky for them they have the money and have more than enough to invest into their company. When BKI repurchase their shares they are sending the message that their stock price is affordable. Only BKI will know how much the company is worth. This leads to a decrease in the number of shares outstanding in the market. BKI is looking for improvements in liquidity of shares and enhancement of the shareholder wealth
Profit earned by BKI can be used by rewarding shareholders in the form of dividends and capital expenditures. In recent years the company’s largest uses of cash had been common dividends. Dividends per share had risen only modestly during the years 2004, 2005 and 2006. The average capital expenditures during the past three years were just over $10 million per year. BKI would go into buy back because they have unused cash and their share valuation should be higher. Because BKI has excess cash and not many other projects to invest into, it is better for them just to reinvest in what they already have. Buyback of shares is mostly done at a higher price than the current market price of the stock. So on numerous occasions, BIK, by buying their own shares at a price higher than prevailing market price, company signals to the market that its share valuation should be higher.
From what we have gathered, there are many advantages of the buying back of shares. Some advantages are increase confidence in management, enhances share value, high share price, reduce takeover chances, increases ROE, psychological effect and excellent tool for financial reengineering. There are many
Profit earned by BKI can be used by rewarding shareholders in the form of dividends and capital expenditures. In recent years the company’s largest uses of cash had been common dividends. Dividends per share had risen only modestly during the years 2004, 2005 and 2006. The average capital expenditures during the past three years were just over $10 million per year. BKI would go into buy back because they have unused cash and their share valuation should be higher. Because BKI has excess cash and not many other projects to invest into, it is better for them just to reinvest in what they already have. Buyback of shares is mostly done at a higher price than the current market price of the stock. So on numerous occasions, BIK, by buying their own shares at a price higher than prevailing market price, company signals to the market that its share valuation should be higher.
From what we have gathered, there are many advantages of the buying back of shares. Some advantages are increase confidence in management, enhances share value, high share price, reduce takeover chances, increases ROE, psychological effect and excellent tool for financial reengineering. There are many