Assume that Blaine Kitchenware CEO Victor Dubinski has made the following share repurchase proposal to Blaine’s board of

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Assume that Blaine Kitchenware CEO Victor Dubinski has made thefollowing share repurchase proposal to Blaine’s board ofdirectors:
Blaine will use $209 million of cashfrom its balance sheet and $50 million in new debt-bearing interestat the rate of 6.75% to repurchase 14.0 million shares at a priceof $18.50 per share.
You have subsequently been hired as a consultant by the membersof Blaine’s board of directors to assess the advantages anddisadvantages of this proposal and to provide a recommendation tothe board about whether or not to approve this proposal. Write abrief report providing your recommendation, answering the followingquestions along the way:
1. Do you believe Blaine’s current capital structure andpayout policies are appropriate? Why or why not? (For thisquestion, think especially about the combined implications forBlaine of the lessons of Chapters 14 and 15, noting with regard toChapter 15 that the approximately $200 million in interest-bearingmarketable securities that Blaine holds, together with theirresultant $16 million or so in taxableinterest income(in contrast to interest expense, which would betax deductible) could be viewed from a Miller andModigliani perspective as a “negative taxshield.”)