1. Q1How do the financial statements for M&M Pizza vary with the proposed repurchase plan? Do the alternative policies improve the expected dividends per share?

2. Q2What impact does the repurchase plan have on M&Ms weighted average cost of capital?

3. Q3What are the debt and equity claim worth under the alternative scenarios? You may note that the present value of a perpetual cash flow stream is equal to the expected payment divided by the associated required return.

4. Q4Which proposal is best for investors? What do you recommend that Miller do?

5. Q5How would your analysis in questions 2 and 3 and recommendation in question 4 change if the new tax law is implemented? Please note that, with corporate taxes, the expected debt-to-equity ratio under the share repurchase plan is 0.588 and the number of remaining shares outstanding is 39.4 million.

-3- UV6629 Exhibit 1 M&M PIZZA Pro Forma Financial Statement (in millions of Franco dollars, except per-share figures) Income Statement Revenue Operating expenses Operating profit Net income 1,500 1,375 125 125 Dividends Shares outstanding Dividends per share 125 62.5 2.00 Balance Sheet Current assets Fixed assets Total assets 450 550 1,000 Book debt Book equity Total capital 0 1,000 1,000 Source: Created by case writer. -3- UV6629 Exhibit 1 M&M PIZZA Pro Forma Financial Statement (in millions of Franco dollars, except per-share figures) Income Statement Revenue Operating expenses Operating profit Net income 1,500 1,375 125 125 Dividends Shares outstanding Dividends per share 125 62.5 2.00 Balance Sheet Current assets Fixed assets Total assets 450 550 1,000 Book debt Book equity Total capital 0 1,000 1,000 Source: Created by case writer