According to the Starbucks case, the firm plans to create 8,500 new jobs at its coffee plant in Georgia. Being that Starbucks also recently announced a $15 minimum wage, this will cost Starbucks at least $265M in additional yearly wages. Create an EPS/EBIT analysis that accounts for both $265M in new wages and $1.5B in existing strategy. Assume an EBIT range of $3B to $5B, an interest rate of 3.5%, a tax rate of 21%, a stock price of $89, and 1.2B shares outstanding. Based on your analysis, should debt or stock be used to finance these strategies in a poor economy?

Starbucks is divided into four major operating segments: 1. Americas, including the United States, Canada, and Latin America 2. China/Asia Pacific (CAP) 3. Europe, Middle East, and Africa (EMEA) 4. Channel Development All segments are comprised of stores, except "Channel Development" that includes all the Starbucks beverages and other branded products sold throughout the world through "channels" such as grocery stores, warehouse clubs, specialty retailers, convenience stores, and food-service accounts. The company has a few non-reportable operating segments, such as Teavana retail stores and Seattle's Best Coffee, and Siren Retail that offers taste testing operations. The non-reporting segments are simply classified as Other Segments in the company's financial reports. For fiscal 2017, Starbucks' revenues by segment as a percentage of total net revenues were as follows: Americas (70\%), CAP (14\%), EMEA (5\%), Channel Development (9\%), and All Other Segments (2\%). Thus, the Americas is by far the dominant segment for Starbucks. The Americas, CAP, and EMEA segments include both companyoperated and licensed stores. In order to examine what Starbucks is doing currently, Exhibit 2 provides a summary of Starbucks operations across segments for Q1 2018. Notice that 700 new Starbucks stores were opened that quarter, but the company's overall operating income declined 1 percent, primarily due to the 11 percent drop in operating profits in the EMEA segment. That segment is lagging the others in overall performance. Finance During Q1 of fiscal 2018 that ended December 31, 2017, active membership in Starbucks Rewards in the United States grew 11 percent versus the prior year to 14.2 million, with member spending comprising 37 percent of U.S. company-operated sales, and Mobile Order and Pay representing another 11 percent of U.S. company-operated transactions. The Starbucks Card was used for 42 percent of U.S. and Canada company-operated transactions. During Q1 2018, Starbucks opened 700 net new stores globally, bringing total store count to 28,039 across 76 counties. Also, during Q1, the company returned a record $2 billion to shareholders through a combination of dividends and share repurchases. Specifically, Starbucks repurchased 28.5 million shares of common stock in Q1; approximately 52 million shares remain available for purchase under current authorizations. Starbucks income statements and balance sheets for fiscal 2016 and 2017 are provided in Exhibit 4 and Exhibit 5, respectively. Notice all the green arrows pointing upward signifying that the company is performing quite well. Source: Based on company documents. Figure 4 Full Alternative Text Exhibit 5 Starbucks' Balance Sheets (000 omitted) Source: Based on company documents. Figure 5 Full Alternative Text [0 Starbucks operations across segments for Q1 2018. Notice that 700 new Starbucks stores were opened that quarter, but the company's overall operating income declined 1 percent, primarily due to the 11 percent drop in operating profits in the EMEA segment. That segment is lagging the others in overall performance. Source: Based on the company's Q1 2108 quarterly report. Starbucks provides in their financial documents a breakdown of revenue by type of store. Revenue from company-operated stores accounted for 57 percent of total net revenues during fiscal 2017. Exhibit 3 reveals that there are slightly more licensed stores than company-owned stores because outside of the Americas, Starbucks prefers to utilize licensed stores rather than owning stores. Exhibit 3 Starbucks' Number of Stores Across the World as of October 1, 2017 Source: Based on the company's 2017 Aknual Report, p. 3. For Q2 2018 that ended 3-31-18, Starbucks reported that its same store sales increased 2 percent both globally and in the United States, and were up 4 percent in China. The company's revenues in Q2 increased 14 percent to a record $6 billion. Specifically for Q2, Starbucks' revenues from company-owned stores increased 15.1 percent to $4.828 billion