California Pizza Kitchen case study

I need CPK case study IT should be a word sheet and excel sheet. All files attached.
week_3___m_m_summary_table.jpeg

week_3___optimal_capital_strucutre_figure.jpeg

Don't use plagiarized sources. Get Your Custom Essay on
California Pizza Kitchen case study
Just from $13/Page
Order Essay

week_3___california_pizza_kitchen_workbook___student.xls

week_3___financial_leverage_and_capital_structure.ppt

week_3_case_study_assignment___california_pizza_kitchennn.docx

Unformatted Attachment Preview

UVA-S-F-1553.xls
This spreadsheet supports STUDENT analysis of the case,
“California Pizza Kitchen” (UVA-F-1553)
March 31, 2008
Copyright (C) 2008, by the University of Virginia Darden School Foundation.
Exhibit 2
California Pizza Kitchen, Inc.
Consolidated Balance Sheet (in thousands)
As of
12/31/2006
1/1/2006
Assets
Current assets
Cash and cash equivalents
Investments in marketable securities
Other receivables
Inventories
Current deferred tax asset, net
Prepaid income tax
Other prepaid expenses & other current assets
Total current assets
Property and equipment, net
Noncurrent deferred tax asset, net
Goodwill and other intangibles
Other assets
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued compensation and benefits
Accrued rent
Deferred rent credits
Other accrued liabilities
Accrued income tax
Total current liabilities
$
$
$
Other liabilities
Deferred rent credits, net of current portion
Shareholders’ equity:
Common stock
Additional paid-in-capital
Accumulated deficit
Accumulated comprehensive loss
Total shareholders’ equity
Total liabilities & Shareholders’ Equity
Sources of data: Company Annual and Quarterly Reports.
$
11,272
11,408
4,109
3,776
8,437
1,428
5,492
45,922
213,408
4,513
5,967
4,444
274,254
7,054
13,068
13,253
4,056
9,294
$
8,187
7/1/2007
$
7,876
4,745
11,721
$
5,388
37,917
10,709
4,596
11,834
8,769
6,444
49,530
255,382
5,867
5,825
5,522
310,513
271,867
6,328
5,754
6,300
339,779
$
46,725
15,044
15,042
14,532
4,494
13,275
3,614
66,001
5,383
24,810
8,683
27,486
8,662
32,436
197
231,159
(34,013)
(7)
197,336
193
221,163
(13,013)
291
228,647
(3,050)
208,343
225,888
274,254
$
7,178
$
310,513
$
$
14,115
15,572
14,979
5,135
13,980
9,012
72,793
339,779
Exhibit 3
California Pizza Kitchen, Inc.
Consolidated Income Statements (in thousands, except per-share data)
Fiscal Year(1)
2004
2005
2003
Restaurant sales
Franchise and other revenues
Total revenues
Three Months Ended
7/2/2006
7/1/2007
2006
$ 356,260
3,627
359,887
$ 418,799
3,653
422,452
$ 474,738
4,861
479,599
$ 547,968
6,633
554,601
$ 134,604
1,564
136,168
$ 156,592
1,989
158,581
87,806
129,702
70,273
287,781
103,813
152,949
83,054
339,816
118,480
173,751
92,827
385,058
135,848
199,744
108,558
444,150
33,090
49,272
26,214
108,576
38,426
56,912
30,773
126,111
General and administrative
Depreciation and amortization
Pre-opening costs
21,488
20,714
4,147
28,794
23,975
737
36,298
25,440
4,051
43,320
29,489
6,964
11,035
7,070
800
12,206
9,022
852
Severance charges(2)
Loss on impairment of PP&E
Store closure costs
Legal settlement reserve
Operating income
1,221
18,984
5,552
2,700
1,333
25,097
1,160
152
600
26,840
317
571
(349)
(32)
(143)
428
Food, beverage and paper supplies
Labor
Direct operating and occupancy
Cost of Sales
Interest income
Other income
Equity in loss of unconsolidated JV
Total other income (expense)
Income before income tax provision
Income tax provision (benefit)
Net income
$
Net income per common share:
Basic
Diluted
$
$
5,520
(82)
5,602 $
0.30
0.29
$
$
25,525
7,709
17,816
0.93
0.92
707
739
1,105
(22)
1,822
$
28,662
9,172
19,490
$
$
1.01
0.99
768
29,971
8,687
9,622
718
287
91
718
287
91
$
30,689
9,689
21,000
$
8,974
2,961
6,013
$
9,713
3,393
6,320
$
$
1.08
1.06
$
$
0.20
0.20
$
$
0.22
0.21
Selected Operating Data:
Restaurants open at end of period
168
171
188
205
193
213
Company-owned open at end of period(3)
137
141
157
176
162
182
Avg weekly full service rest. sales
(3)
18-mo. comparable rest. sales growth(3)
$
54,896
3.4%
$
57,509
$
8.0%
62,383
7.5%
$
65,406
5.9%
$
65,427
$
4.8%
Notes:
(1)
For the Years Ended December 31, 2006, January 1, 2006 and January 2, 2005, December 28, 2003.
(2)
Severance charges represent payments to former President/CEO and former SVP/Senior Development Officer under terms of their separation agreements.
(3)
Data for company-owned restaurants.
Sources of data: Company Annual and Quarterly Reports and quarterly company earnings conference calls.
68,535
5.4%
Exhibit 4
California Pizza Kitchen, Inc.
Selected Historical Comparable Store Sales (Calendarized)
CY06
CY07
CY03
CY04
CY05
Q1
Q2
Q3
Q4
Q1
California Pizza Kitchen
3.4%
9.3%
6.4%
4.8%
5.9%
5.6%
6.9%
4.7%
Applebee’s International, Inc.
4.1%
4.8%
1.8%
2.6%
-1.8%
-2.3%
-1.1%
-4.0%
BJ’s Restaurants, Inc.
3.3%
4.0%
4.6%
6.8%
5.9%
5.3%
5.5%
6.9%
2.1%
1.9%
3.2%
2.7%
-2.0%
-2.1%
-2.1%
-4.4%
The Cheesecake Factory, Inc.
0.7%
3.9%
1.7%
-1.3%
-0.8%
-1.6%
0.8%
0.4%
Chipotle Mexican Grill, Inc.
24.4%
13.3%
10.2%
19.7% 14.5%
11.6%
10.1%
8.3%
Darden Restaurants, Inc. — Red Lobster
0.0%
-3.9%
4.2%
1.6%
9.4%
-2.1%
0.7%
4.6%
Darden Restaurants, Inc. — Olive Garden
2.2%
4.7%
8.6%
5.7%
2.5%
2.9%
2.9%
1.0%
McCormick & Schmick’s Seafood Restaurants, Inc.
1.1%
3.8%
3.0%
4.1%
2.8%
2.9%
2.0%
2.8%
Panera Bread Company
0.2%
2.7%
7.8%
9.0%
3.2%
2.8%
2.0%
0.0%
P.F. Chang’s China Bistro
5.1%
3.0%
1.2%
1.3%
-1.0%
-0.5%
-0.9%
-2.5%
RARE — Longhorn Steakhouse
4.6%
5.0%
2.8%
3.7%
-0.4%
-0.3%
1.5%
-1.0%
Red Robin Gourmet Burgers
4.1%
7.5%
3.8%
4.8%
3.3%
0.8%
0.2%
-0.5%
Ruth’s Chris Steak House, Inc.
1.4%
11.6%
10.4%
6.8%
6.0%
4.3%
7.4%
1.9%
Sonic Corporation
1.6%
7.0%
5.4%
5.5%
4.3%
4.0%
3.4%
2.0%
Texas Roadhouse, Inc.
3.5%
7.6%
5.6%
6.4%
1.2%
2.3%
3.3%
0.9%
Brinker International
(1)
Note:
(1)
Brinker’s comparable store sales is a blended rate for its various brands.
Source of data: KeyBanc Capital Markets equity research.
Exhibit 5
California Pizza Kitchen, Inc.
Selected Forecasts for California Pizza Kitchen
Firm
Oppenheimer and Co. Inc.
CIBC World Markets
KeyBanc Capital Markets
RBC Capital Markets
Morgan Keegan & Co., Inc.
MKM Partners
Date of Price
2007E
Report Target Revenues
EPS
4/9/2007 $ 40 $
4/12/2007
37
5/11/2007
NA
5/11/2007
37
5/11/2007
NA
5/11/2007
39
Source of data: Selected firms’ equity research.
652.9 $ 1.33
647.5
1.29
NA
1.28
650.7
1.31
644.2
1.33
647.5
1.34
2008E
Revenues EPS
NA
755.1
NA
753.1
742.1
754.3
NA
1.57
1.55
1.59
1.58
1.69
2009E
Revenues EPS
NA
NA
NA
NA
NA
NA
878.2 1.90
NA
NA
NA
NA
Exhibit 6
California Piz z a Kitche n, Inc.
Stock Price Comparison
Date
3-Jul-06
5-Jul-06
6-Jul-06
7-Jul-06
Value of $100 invested in CPK and S&P SmallCap 600 Restaurants Index
10-Jul-06
$140
$130
$100
CPK
S&P SmallCap 600 Restaurants
$80
7/3/2006
9/3/2006
10/3/2006
11/3/2006
12/3/2006
1/3/2007
2/3/2007
3/3/2007
Note:
Adjusted for the June 2007 50% stock dividend. With such a dividend, an owner of two shares of CP K stock was given an additional share.
The effect was to increase CP K shares by a third yet maintain the overall capitalization of the equity.
Sources of data: Yahoo! Finance and Datastream.
4/3/2007
5/3/2007
6/3/2007
98
97
98
97
95
98
92
92
17-Jul-06
98
92
18-Jul-06
96
92
99
94
20-Jul-06
94
91
21-Jul-06
95
90
24-Jul-06
97
93
25-Jul-06
98
95
96
92
27-Jul-06
95
90
28-Jul-06
95
91
31-Jul-06
97
91
1-Aug-06
94
90
2-Aug-06
93
91
3-Aug-06
95
92
95
93
7-Aug-06
96
92
8-Aug-06
100
92
9-Aug-06
95
90
10-Aug-06
98
91
11-Aug-06
8/3/2006
99
97
96
97
4-Aug-06
$90
100
99
101
100
103
26-Jul-06
$110
100
13-Jul-06
14-Jul-06
19-Jul-06
$120
CP K S&P SmallCap 600 Restaurants
11-Jul-06
12-Jul-06
97
92
14-Aug-06
99
94
15-Aug-06
102
96
16-Aug-06
105
98
17-Aug-06
105
99
18-Aug-06
105
21-Aug-06
102
22-Aug-06
101
23-Aug-06
99
24-Aug-06
99
25-Aug-06
97
28-Aug-06
100
99
98
98
97
97
96
97
29-Aug-06
102
99
30-Aug-06
104
100
31-Aug-06
104
99
1-Sep-06
106
100
5-Sep-06
106
101
6-Sep-06
103
7-Sep-06
102
8-Sep-06
104
99
99
100
11-Sep-06
104
101
12-Sep-06
109
104
13-Sep-06
109
105
14-Sep-06
109
105
15-Sep-06
110
106
18-Sep-06
108
105
19-Sep-06
109
105
20-Sep-06
112
107
21-Sep-06
110
106
22-Sep-06
109
105
25-Sep-06
109
106
26-Sep-06
109
106
27-Sep-06
111
106
28-Sep-06
111
105
29-Sep-06
109
104
2-Oct-06
110
104
3-Oct-06
111
104
4-Oct-06
117
109
5-Oct-06
118
109
6-Oct-06
117
109
9-Oct-06
118
109
10-Oct-06
117
108
11-Oct-06
115
107
12-Oct-06
120
110
13-Oct-06
120
111
16-Oct-06
121
112
17-Oct-06
120
111
18-Oct-06
120
111
19-Oct-06
119
110
20-Oct-06
118
109
23-Oct-06
119
110
24-Oct-06
120
111
25-Oct-06
120
111
26-Oct-06
120
112
27-Oct-06
118
110
30-Oct-06
120
111
31-Oct-06
118
110
1-Nov-06
116
109
2-Nov-06
115
109
3-Nov-06
112
106
6-Nov-06
118
108
7-Nov-06
118
108
8-Nov-06
119
109
9-Nov-06
116
107
10-Nov-06
114
108
13-Nov-06
111
108
14-Nov-06
112
110
15-Nov-06
112
111
16-Nov-06
111
112
17-Nov-06
112
111
20-Nov-06
113
111
21-Nov-06
113
111
22-Nov-06
113
111
24-Nov-06
112
111
27-Nov-06
108
108
28-Nov-06
112
108
29-Nov-06
116
109
30-Nov-06
115
109
1-Dec-06
115
108
4-Dec-06
118
111
5-Dec-06
116
111
6-Dec-06
116
110
7-Dec-06
118
110
8-Dec-06
118
110
11-Dec-06
119
110
12-Dec-06
119
109
13-Dec-06
120
109
14-Dec-06
120
109
15-Dec-06
119
109
18-Dec-06
119
108
19-Dec-06
118
108
20-Dec-06
118
109
21-Dec-06
117
109
22-Dec-06
117
109
26-Dec-06
120
110
27-Dec-06
122
111
28-Dec-06
122
111
29-Dec-06
122
110
3-Jan-07
123
110
4-Jan-07
124
110
5-Jan-07
122
108
8-Jan-07
123
108
9-Jan-07
124
109
10-Jan-07
126
110
11-Jan-07
131
112
12-Jan-07
134
112
16-Jan-07
133
112
17-Jan-07
132
111
18-Jan-07
130
110
19-Jan-07
129
110
22-Jan-07
129
109
23-Jan-07
129
110
24-Jan-07
130
111
25-Jan-07
129
109
26-Jan-07
130
108
29-Jan-07
130
108
30-Jan-07
131
109
31-Jan-07
130
111
1-Feb-07
131
112
2-Feb-07
132
112
5-Feb-07
131
111
6-Feb-07
131
111
7-Feb-07
130
112
8-Feb-07
131
112
9-Feb-07
130
111
12-Feb-07
129
111
13-Feb-07
130
112
14-Feb-07
129
113
15-Feb-07
129
113
16-Feb-07
120
113
20-Feb-07
120
115
21-Feb-07
123
117
22-Feb-07
122
117
23-Feb-07
122
118
26-Feb-07
121
116
27-Feb-07
116
112
28-Feb-07
117
113
1-Mar-07
117
113
2-Mar-07
116
111
5-Mar-07
114
109
6-Mar-07
118
111
7-Mar-07
118
111
8-Mar-07
117
111
9-Mar-07
117
112
12-Mar-07
117
112
13-Mar-07
117
110
14-Mar-07
118
111
15-Mar-07
117
111
16-Mar-07
115
110
19-Mar-07
117
111
20-Mar-07
117
111
21-Mar-07
116
113
22-Mar-07
115
113
23-Mar-07
115
113
26-Mar-07
118
112
27-Mar-07
117
112
28-Mar-07
117
111
29-Mar-07
118
111
30-Mar-07
120
112
2-Apr-07
120
112
3-Apr-07
122
114
4-Apr-07
120
113
5-Apr-07
121
113
9-Apr-07
121
113
10-Apr-07
119
113
11-Apr-07
117
112
12-Apr-07
119
112
13-Apr-07
120
112
16-Apr-07
122
114
17-Apr-07
121
114
18-Apr-07
121
113
19-Apr-07
122
112
20-Apr-07
124
114
23-Apr-07
125
113
24-Apr-07
121
113
25-Apr-07
121
114
26-Apr-07
122
114
27-Apr-07
124
113
30-Apr-07
122
110
1-May-07
124
111
2-May-07
126
112
3-May-07
125
112
4-May-07
123
112
7-May-07
125
113
8-May-07
124
113
9-May-07
126
113
10-May-07
125
111
11-May-07
135
113
14-May-07
132
112
15-May-07
130
111
16-May-07
130
112
17-May-07
128
111
18-May-07
129
112
21-May-07
134
113
22-May-07
133
113
23-May-07
132
113
24-May-07
133
112
25-May-07
133
113
29-May-07
133
113
30-May-07
133
113
31-May-07
134
113
1-Jun-07
135
114
4-Jun-07
135
115
5-Jun-07
134
114
6-Jun-07
132
111
7-Jun-07
126
109
8-Jun-07
128
110
11-Jun-07
126
109
12-Jun-07
124
108
13-Jun-07
124
109
14-Jun-07
124
110
15-Jun-07
125
110
18-Jun-07
124
110
19-Jun-07
123
109
20-Jun-07
121
108
21-Jun-07
118
105
22-Jun-07
117
104
25-Jun-07
115
104
26-Jun-07
115
104
27-Jun-07
117
106
28-Jun-07
117
105
29-Jun-07
118
104
2-Jul-07
121
105
Exhibit 7
California Pizza Kitchen, Inc.
Comparative Restaurant Financial Data, 2006 Fiscal Year (in millions, except per-share data)
Fiscal Year End
7/2/2007
Month Share Price
California Pizza Kitchen
Dec. $
Applebee’s International, Inc.
Dec.
BJ’s Restaurants, Inc.
Dec.
Brinker International(1)
Net Profit
Earnings
Dividends
Margin
Margin
Per Share
Per Share
1,338
15.9%
6.5%
1.17
0.20
6.49
0.80
20.05
239
9.6%
4.1%
0.41
0.00
7.78
1.05
June
29.37
4,151
12.0%
4.7%
1.49
0.20
8.59
0.90
Buffalo Wild Wings, Incorporated
Dec.
41.78
278
13.3%
5.8%
0.93
0.00
6.61
1.10
The Cheesecake Factory, Inc.
Dec.
24.57
1,315
12.2%
6.2%
1.02
0.00
9.09
1.00
Chipotle Mexican Grill, Inc.
Dec.
86.00
823
13.0%
5.0%
1.28
0.00
14.56
NA
Darden Restaurants, Inc.(2)
May
44.14
5,721
13.2%
5.9%
2.16
0.40
8.37
1.00
Frisch’s Restaurants, Inc.
May
30.54
291
31.6%
3.1%
1.78
0.44
19.84
0.60
McCormick & Schmick’s
Dec.
25.66
308
9.7%
4.3%
0.92
0.00
11.20
1.10
Panera Bread Company
Dec.
46.02
829
16.3%
7.2%
1.87
0.00
12.53
1.25
P.F. Chang’s China Bistro
Dec.
35.37
938
10.5%
3.6%
1.24
0.00
11.41
1.10
Dec.
26.76
987
11.6%
5.1%
1.45
0.00
11.17
0.57
Red Robin Gourmet Burgers
Dec.
40.19
619
13.7%
4.9%
1.82
0.00
14.68
1.05
Ruth’s Chris Steak House, Inc.
Dec.
16.80
272
15.6%
8.7%
1.01
0.00
2.93
NA
Sonic Corporation
Aug.
22.00
693
24.9%
11.4%
0.88
0.00
4.66
0.90
Texas Roadhouse, Inc.
Dec.
12.81
597
12.5%
5.7%
0.44
0.00
4.30
0.90
Current
Current
Total
Shr.
Debt/
Interest
T. Capital
Return On
Assets
Liabilities
Debt
Equity
Capital
Coverage
Turnover
Capital Equity
208
0.0%
NMF
2.7
10.1% 10.1%
14.0% 18.0%
Applebee’s International, Inc.
BJ’s Restaurants, Inc.
Brinker International(1)
Buffalo Wild Wings, Incorporated
38
$
66
$
0
$
0.00
$
7.20
Beta
24.28
$
$
Per Share
3.8% $
California Pizza Kitchen
0.71
Book Value
10.7%
(3)
$
EBITDA
555
RARE Hospitality International Inc.
22.10
Revenue
0.85
105
187
175
487
26.5%
11.7
2.0
96
36
0
203
0.0%
NMF
1.2
242
497
502
1,076
31.8%
14.4
2.6
13.2% 18.0%
4.9%
4.9%
75
26
0
116
0.0%
NMF
2.4
14.0% 14.0%
The Cheesecake Factory, Inc.
203
163
0
712
0.0%
NMF
1.8
11.4% 11.4%
Chipotle Mexican Grill, Inc.
179
61
0
474
0.0%
NMF
1.7
Darden Restaurants, Inc.(2)
378
1,026
645
1,230
34.4%
10.9
3.1
Frisch’s Restaurants, Inc.
12
31
43
101
30.1%
5.9
2.0
7.9%
9.1%
McCormick & Schmick’s
30
40
0
160
0.2%
NMF
1.9
8.3%
8.3%
Panera Bread Company
128
110
0
398
0.0%
NMF
2.1
15.1% 15.1%
P.F. Chang’s China Bistro
8.8%
8.7%
20.6% 27.5%
65
104
19
290
6.2%
NMF
3.0
11.1% 11.5%
125
134
166
360
31.6%
29.2
1.9
9.8% 13.9%
Red Robin Gourmet Burgers
29
70
114
244
31.9%
7.7
1.7
9.3% 12.5%
Ruth’s Chris Steak House, Inc.
26
59
68
68
50.0%
12.8
2.0
18.6% 34.9%
Sonic Corporation
43
78
159
392
28.9%
15.0
1.3
15.3% 20.1%
Texas Roadhouse, Inc.
53
78
36
319
10.2%
19.9
1.7
9.7% 10.7%
RARE Hospitality International Inc.(3)
Notes:
(1)
Brinker’s restaurant brands include Chili’s Grill & Bar, Romano’s Macaroni Grill, On The Border and Maggiano’s.
(2)
Darden’s restaurant brands include Red Lobster and The Olive Garden.
(3)
RARE’s restaurant brands include LongHorn Steakhouse, The Capital Grille and Bugaboo Creek Steak House.
Sources of data: Value Line Investment Survey , 2007; Standard & Poor’s Stock Report , 2007 and company Annual Reports and websites.
Exhibit 8
California Pizza Kitchen, Inc.
Interest Rates and Yields
2000
2001
2002
2003
2004
2005
2006: Jan.
Feb.
Mar.
Apr.
May.
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
2007: Jan.
Feb.
Mar.
Apr.
May.
June
U.S. Treasury Securities
Bills
Notes & Bonds
3-month
6-month
3-year
10-year
30-year
5.85%
5.92%
6.22%
6.03%
5.94%
3.45%
3.39%
4.09%
5.02%
5.49%
1.62%
1.69%
3.10%
4.61%
……
1.02%
1.06%
2.10%
4.01%
……
1.38%
1.58%
2.78%
4.27%
……
3.16%
3.40%
3.93%
4.29%
……
4.20%
4.41%
4.51%
4.59%
4.72%
4.79%
4.96%
4.98%
4.82%
4.89%
4.95%
4.85%
4.96%
5.02%
4.97%
4.88%
4.77%
4.63%
4.30%
4.51%
4.61%
4.72%
4.81%
4.95%
5.09%
4.99%
4.90%
4.91%
4.96%
4.88%
4.94%
4.97%
4.90%
4.87%
4.80%
4.77%
4.35%
4.64%
4.74%
4.89%
4.97%
5.09%
5.07%
4.85%
4.69%
4.72%
4.64%
4.58%
4.79%
4.75%
4.51%
4.60%
4.69%
5.00%
4.42%
4.57%
4.72%
4.99%
5.11%
5.11%
5.09%
4.88%
4.72%
4.73%
4.60%
4.56%
4.76%
4.72%
4.56%
4.69%
4.75%
5.10%
Sources of data: Economic Report of the President and Fannie Mae website.
……
4.54%
4.73%
5.06%
5.20%
5.15%
5.13%
5.00%
4.85%
4.85%
4.69%
4.68%
4.85%
4.82%
4.72%
4.87%
4.90%
5.20%
Average
Corporate bonds (Moody’s)
Prime
Aaa 3
Baa
Lending
7.62%
8.36%
9.23%
7.08%
7.95%
6.91%
6.49%
7.80%
4.67%
5.67%
6.77%
4.12%
5.63%
6.39%
4.34%
5.24%
6.06%
6.19%
5.29%
5.35%
5.53%
5.84%
5.95%
5.89%
5.85%
5.68%
5.51%
5.51%
5.33%
5.32%
5.40%
5.39%
5.30%
5.47%
5.47%
5.79%
6.24%
6.27%
6.41%
6.68%
6.75%
6.78%
6.76%
6.59%
6.43%
6.42%
6.20%
6.22%
6.34%
6.28%
6.27%
6.39%
6.39%
6.70%
7.38%
7.50%
7.63%
7.75%
7.88%
7.13%
8.25%
8.25%
8.25%
8.25%
8.25%
8.25%
8.25%
8.25%
8.25%
8.25%
8.25%
8.25%
Average
LIBOR
3-month
6.55%
3.63%
1.79%
1.22%
1.67%
3.63%
4.68%
4.82%
4.99%
5.15%
5.23%
5.51%
5.49%
5.40%
5.37%
5.37%
5.37%
5.36%
5.36%
5.36%
5.35%
5.36%
5.36%
5.36%
max
min
avg
#REF!
#REF!
#REF!
max
min
avg
#REF!
#REF!
#REF!
max
min
avg
#REF!
#REF!
#REF!
Exhibit 9
CALIFORNIA PIZZA KITCHEN
Pro Forma Tax Shield Effect of Recapitalization Scenarios
(Dollars in thousands, except share data; figures based on end of June 2007)
Actual
Debt/Total Capital
10%
20%
30%
Interest rate (1)
Tax rate
6.16%
32.5%
6.16%
32.5%
6.16%
32.5%
6.16%
32.5%
Earnings before income taxes and interest (2)
Interest expense
30,054
0
30,054
1,391
30,054
2,783
30,054
4,174
Earnings before taxes
Income taxes
Net income
30,054
9,755
20,299
28,663
9,303
19,359
27,271
8,852
18,419
25,880
8,400
17,480
0
225,888
225,888
22,589
203,299
225,888
45,178
180,710
225,888
67,766
158,122
225,888
0
22,589
45,178
67,766
643,773
643,773
628,516
651,105
613,259
658,437
598,002
665,769
Book value:
Debt
Equity
Total capital
Market value:
Debt(3)
(4)
Equity
Market value of capital
Notes:
(1)
Interest rate of CPK’s credit facility with Bank of America: LIBOR + 0.80%.
(2)
EBIT includes interest income.
(3)
Market values of debt equal book values.
(4)
Actual market values of equity equals the share price ($22.10) multiplied by the current number of shares outstanding (29.13 million).
Source: Case writer analysis based on CPK financial data.
Week 3
Financial Leverage and Capital Structure
Key Concepts and Skills
? Understand the effect of financial leverage on cash
flows and the cost of equity
? Understand the impact of taxes and bankruptcy on
capital structure choice
? Understand the basic components of the bankruptcy
process
16-2
Chapter Outline
? The Capital Structure Question
? The Effect of Financial Leverage
? Capital Structure and the Cost of Equity Capital
? M&M Propositions I and II with Corporate Taxes
? Bankruptcy Costs
? Optimal Capital Structure
? The Pie Again
? The Pecking-Order Theory
? Observed Capital Structures
? A Quick Look at the Bankruptcy Process
16-3
Capital Restructuring
? We are going to look at how changes in capital
structure affect the value of the firm, all else equal
? Capital restructuring involves changing the amount
of leverage a firm has without changing the firm’s
assets
? The firm can increase leverage by issuing debt
and repurchasing outstanding shares
? The firm can decrease leverage by issuing new
shares and retiring outstanding debt
16-4
Choosing a Capital Structure
? What is the primary goal of financial
managers?
? Maximize stockholder wealth
? We want to choo …
Purchase answer to see full
attachment

GradeAcers
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Reviews

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Reviews

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.

Order your essay today and save 15% with the discount code DISCOUNT15