California Pizza Questions.docx - California Pizza 1 What is going on at CPK What decisions does Susan Collyns face What do you recommend a Discuss the

California Pizza Questions.docx - California Pizza 1 What...

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California Pizza 1. What is going on at CPK? What decisions does Susan Collyns face? What do you recommend? a. Discuss the operating performance of CPK b. Discuss management’s agenda c. Discuss stock price performance of CPK 2. How does debt add value to CPK? a. Add the following values to the table provide in Exhibit 9 and complete it them for the actual scenario and the three proposed scenarios: Market value of Debt/MV of Capital Price per share Shares repurchased (thousands) Shares outstanding (thousands) Earnings per share Price to earning ratio Beta Cost of equity WACC D/E] t) (1 + [1 = unlevered levered Present value of tax shield using perpetuity formula = (
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Unformatted text preview: k d × D × t )/ k d = D × t. Post-announcement share price = P N = Pre-Announcement Price + D × t /shares outstanding. Number of shares repurchased = D / P N . Cost of Equity = Risk Free Rate(Given in Ex. 8) + Beta*(MRP=5%) WACC: Use MV weights and Debt Rate provided and Cost of Equity calculated b. Discuss what scenario investors would prefer and what the tradeoff is for investors as the firm adds leverage. Conclude with which scenario you recommend and why. 3. What is the case for not doing recapitalization? 1 2...
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  • Spring '17
  • glambosky

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