Transcript Case 33. California Pizza Kitchen

Case 33. California Pizza Kitchen
1. Background
• Though CPK has showed strong performance,
its stock price has gone down by 10%.
Management team started to discuss stock
repurchase with debts. Since the year of
2000, CPK management avoided putting debts
on the balance sheet.
• Recently CPK issued 50% stock dividend (3 for
2 stock split effect).
2. Questions
• 1) Summarize the business of California Pizza
Kitchen and Restaurant Industry.
• 2) How much is needed to borrow to
repurchase stocks in order to improve stock
price? 15.6 in Ch15.
• 3) What is weighted average cost of capital at
the optimal borrowing level? Section 15.5 in
Ch15.
• 4) What is EPS at the optimal borrowing level?
• 5) How about voting control issue or debt
rating?