Case 33- California Pizza Kitchen This case considered the impact of CPK moving from using no debt in its capital structure to the possibility of having a debt offering comprising 10%, 20% or 30% (of book value). 1. What role does the tax deductibility of interest play in encouraging debt financing at companies like CPK? Explain how increased financial leverage impacts a firm's cash flows to its investors and creditors, and thereby adds to the firm's market value. Explain how you would go about computing the anticipated CPK share price in the event debt was issued and used to repurchase shares