we studied this time is CPK‚ which is a restaurant with creative menu‚ high quality of foods‚ nice dinning environment‚ good dinning atmosphere‚ convenient traffic location and etc. The case discussion this time was more focused on the numerical data instead of strategy analysis. Although it’s not so easy for me to catch up with all information that the present group show‚ I think it’s really interesting. The main problem we need to discuss is how to raise the declining CPK stock price which happened
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Case #33 California Pizza Kitchen Synopsis and Objectives This case examines the question of financial leverage at California Pizza Kitchen (CPK) in July 2007. With a highly profitable business and an aversion to debt‚ CPK management is considering a debt-financed stock buyback program. The case is intended to provide an introduction to the Modigliani-Miller capital structure irrelevance propositions and the concept of debt tax shields. With the background of a pizza company‚ the case provides
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Brief history of CPK (p.3) Reasons for CPKs success (p.3) Ways to facilitate the success of CPK (p.3-4) Anticipated effect of changing the capital structure on return on equity (p.4) Anticipated effect of changing the capital structure on cost of capital (p.5) Expected number of shares of CPK that can be repurchased (p.6-7) Anticipated effect of changing the capital structure on CPKs stock price (p.6-7) Our recommendation (p.7) In order to explore whether or not California Pizza Kitchen should
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facilitate the success of CPK? - repurshasing company shares through debt financing‚ since the price of the shares declined by 10%. The view is that a strong balance sheet would maintain the borrowing ability needed to support CPK’s expected growth. - increasing international franchises and expand the agreement with Kraft Foods throught a strong partnership. Kraft Foods | International Franchises | * 95% pretax margin * obliged to spend 5% of gross sales on marketing the CPK frozen pizza brand
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Creating a presentation of the information that was gathered in my research would be beneficial. 1. What the specific defect is 2. What caused defect 3. Location of products 4. Reason for failure to comply with regulation Equipped with the Recall Handbook from the Consumer Product Safety Commission (CPDC) I would present the information in a group setting to the CEO‚ directors and managers. The type of liability claim should be identified as well whether it is ((defective product design‚ defective
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drop. Up until this time CPK had avoided taking on debt‚ but with this stock dip management is considering a stock repurchase program. CPK had practiced conservative fiscal policy to ensure “staying power;” but with interest rates set to rise and competition falling behind‚ this could be the perfect time to take on more risk. With this in mind‚ CFO Susan Collyns is considering levering her company’s equity by purchasing stock with debt. 2) How does Debt add value at CPK? (values in thousands)
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Summary Beaver Brothers‚ Inc. is conducting a study to assess the accuracy‚ and consistency of their 150-gram bar soap production line. They are interested in seeking; the reliability‚ average weight and range of each soap bar. By conducting this study Beaver Brothers‚ Inc. wants to see the consistency of their machines‚ dependability of their marketing tools and the level of assurance that they are promoting and supplying trustworthy products to their consumers. Beaver Brother‚ Inc. achieves their
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Preparatory Questions for California Pizza Kitchen 1. In what ways can Susan Collins facilitate the cusses of CPK? 2. Using the scenarios in case Exhibit 9‚ what roles does leverage play in affecting the return on equity (ROE) for CPK? What about the cost of capital? a. Leverage increases Beta for the firm since debt to equity ratio increases from unlevered beta. We use 10 year Treasury bond as our risk free rate and for market risk premium we use current prime lending rate for June 2007
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California Pizza Kitchen (CPK) was founded in 1985 by Larry Flax and Rick Rosenfield with a vision of offering customers designer pizza at reasonable prices. CPK’s target market is geared towards affluent customers making $75‚000 annually‚ and over the span of 2 decades the business was able to grow from a single location into 213 locations across 28 states and 6 foreign countries. CPK generates revenue from 3 main sources: company restaurants‚ franchises‚ and royalties. CPK stands out from its peers
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Running Head: CPK Mission‚ Vision CPK Mission‚ Vision‚ Values‚ and Goals INTRODUCTION The California Pizza Kitchen was founded in 1985 by attorneys Rick Rosenfield and Larry Flax. The two lawyers worked together to fulfill their desire to enter the restaurant business. They created innovative toppings for their menu with recipes such as the Jamaican Jerk Chicken and the Pear & Gorgonzola pizzas. According to their website‚ they operate “more than 250 CPKs in 32 states and
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