Find factors that could explain the huge decline in market value and how they relate to the growing perpetuity formula. Show some calculations why, when built into an NPV model for investors, these "abrupt changes" in perceived cash flows being generated by the firm can have huge impacts om its market capitalization.

Exhibit 1 KRISPY KREME DOUGHNUTS, INC. Income Statements (in thousands, except per-share amounts) Jan. 30, Jan. 28, Three Months Ended Three Months Ended Feb. 3, Feb. 2, Feb. 1, May 5, May 2, Aug 3 Aug. 1, 2000 2001 2002 2003 2004 2003 2004 2003 2004 Total revenues 220,243 300,715 394,354 491,549 665,592 159,176 177,448 Operating expenses 190,003 250,690 148,660 184,356 14,856 20,061 316,946 381,489 507,396 27,562 1 12,480 141,383 120,573 145,633 General and administrative expenses 28,897 9,060 11,845 Depreciation and amortization expenses 4,546 8,902 10,664 6,457 7,959 36,912 12,271 19,723 4,101 6,130 4,536 6,328 Arbitration award 9,075 (525) (525) Provision for restructuring Impairment charges and closing costs 7,543 1,802 Income from operations 10,838 23,507 41,887 59,817 102,086 23,702 18,636 25,007 11,840 Interest income 293 2,325 2,980 1,966 921 227 176 205 226 Interest expense (1,525) (607) (337) (1,781) (4,409) (866) (1,433) (997) (1,366) Equity loss in joint ventures (706) (602) (2,008) (1,836) (694) (575) (802) (399) Minority interest 100.1 (716) (1,147) (2,287) (2,072 616) (126) (616) 267 Other expense, net (20) (235) (934) (13) (25) (156) (343) 114 Income before income taxes 9,606 23, 783 42,546 54, 773 94,677 21,728 16,522 22,454 10,682 Provision for income taxes 3,650 9,058 16, 168 21,295 37,590 8 , 588 6,675 9.014 4,438 Discontinued operations' 34,285 439 480 Net income 5,956 14,725 26, 378 33, 478 57,087 13,140 (24,438) 13,001 5,764 Diluted earnings per share 0. 15 0.27 0.45 0.56 0.92 0.22 (0.38) 0.21 0.10 Number of shares outstanding (millions) 39.7 54.5 58.6 59.8 62.1 60.7 63.6 62.1 63.4 Resulting from divestiture of Montana Mills. age,or Data source: Company filings with the Securities and Exchange Commission (SEC). Store clarity 174 growth "4 of tort Mores 49.3%