Question Description
California Pizza Kitchen Power Point
This case examines the question of financial leverage at California Pizza Kitchen (CPK). With a highly profitable business and an aversion to debt, CPK management is considering a new way to examine its capital budgeting structure.
Go to the CPK website (investor relations) and create a 15 slide elegant Power Point presenting the information here: In your power point address:
What is California Pizza Kitchen – Discuss its business model, mission statement, community outreach, etc.
When did it go public and why did it go public?
When did it go private and why did it go private?
Who is California Pizza Kitchen's major publicly traded competitor? Go to Value Line via our University Library and pull the Value Line sheet for this competitor.
Do you conclude that California Pizza Kitchen's business model is successful? Why or why not?
In addition to the case, these references might assist you:
http://articles.latimes.com/2011/may/26/business/la-fi-cpk-20110526 (Links to an external site.)
California Pizza Kitchen Case Write Up
Write a short paper (single-space within paragraphs, double-spaced between paragraphs, 12 point Times Roman font) which answers the following questions.
Susan Collyns and Her Decisions: What is the background at CPK during the time period reflected in this case? What decisions does Susan Collyns face? What do you recommend?
Value of CPK: The value of CPK depends on the total size of the profits and now how the profits are divided up. Do you think CPK will be "just fine" based on the information in the case?
How does debt add value to CPK?
CPK has a tradition of conservative financial policy based on its concern for maintaining staying power. Should senior management invest in more debt to leverage the tax benefits?
In the end, California Pizza Kitchen did decide to repurchase $16.8 million of company shares. It was funded by a line of credit. This means that the company's outstanding borrowings stood at $17 million by the end of summer. In early 2008, the company announced its intention to repurchase an ADDITIONAL $46.3 million. CPK funded this with more borrowings and cash. Do you think this was the right decision? (http://articles.latimes.com/2011/may/26/business/la-fi-cpk-20110526 (Links to an external site.)).
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