Based on the analysis in case Exhibit 9, what is the anticipated CPK share price under each scenario? How many shares will CPK be likely to repurchase under each scenario? What role does the tax deductibility of interest play in encouraging debt financing at CPK?

thank you in advance.

l Verizon 9:02 PM a gannon.blackboard.comC Introduction Exh. 2 Exh. 3Exh. 4 Exh. 5 Exh. 6 Exh.7 Exh. 8 Exhibit 9 CALIFORNIA PIZZA KITCHEN Pro Forma Tax Shield Effect of Recupitalization Scenarios sin thousands, except share data: figaes based on end of Janc 2007) Debt Total Ca Actual 200% Interest rate (1) Tax rate 6.16% 32.5% 6.160% 32.5% 6.16% 32.5% 6.16% 32.5% Earnings before income taxes and interest2) Interest expense 0,054 0,054 30,054 30,054 2783 27.271 28,663 9,303 Earnings before taxes 30,054 25,880 Income taxes 9.755 Net incoe 7.480 Book value: Debt 22,589 45,178 67,766 Total capital Market value: Debw3) Equityt4) 22,589 45,178 67,766 Market value of capatal > Interest rate of CFK's credit facility with Bank of Americ? 2) EBIT inclades intert incomc LIBOR-(..80%. Market values of debt equal book vaes 4) Acoual markct valucs ofequity equsls the share price 1522.10) multiplied by the crrent sumber of shares outstardin 12.13 million Soarve: Coe wier enalyous based va CPK finncial date l Verizon 9:02 PM a gannon.blackboard.comC Introduction Exh. 2 Exh. 3Exh. 4 Exh. 5 Exh. 6 Exh.7 Exh. 8 Exhibit 9 CALIFORNIA PIZZA KITCHEN Pro Forma Tax Shield Effect of Recupitalization Scenarios sin thousands, except share data: figaes based on end of Janc 2007) Debt Total Ca Actual 200% Interest rate (1) Tax rate 6.16% 32.5% 6.160% 32.5% 6.16% 32.5% 6.16% 32.5% Earnings before income taxes and interest2) Interest expense 0,054 0,054 30,054 30,054 2783 27.271 28,663 9,303 Earnings before taxes 30,054 25,880 Income taxes 9.755 Net incoe 7.480 Book value: Debt 22,589 45,178 67,766 Total capital Market value: Debw3) Equityt4) 22,589 45,178 67,766 Market value of capatal > Interest rate of CFK's credit facility with Bank of Americ? 2) EBIT inclades intert incomc LIBOR-(..80%. Market values of debt equal book vaes 4) Acoual markct valucs ofequity equsls the share price 1522.10) multiplied by the crrent sumber of shares outstardin 12.13 million Soarve: Coe wier enalyous based va CPK finncial date