California Pizza 1. What is going on at CPK? What decisions does Susan Collyns face? 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 f the actual scenario and the three proposed scenarios: Market value of Debt/MV of Copital Price per share Shares repurchased (thousands) Shares outstanding (thousands) Earnings per shore Price to earning ratio Beto Cost of equity WACC Present value of tax shield using perpetuity formula = (k, * D x ()/k; = D * t Post-announcement share price = P. = Pre-Announcement Price + D * o/shares outstanding. Number of shares repurchased = DIP,. Cost of Equity = Risk Free Rate(Given in Ex. 8) + Beto*(MRP=596) 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 investors as the firm adds leverage. Conclude with which scenario y recommend and why. 3. What is the case for not doing recapitalization