callifornia pizza kitchen Essay

5941 Words Apr 24th, 2015 24 Pages
Report on
Case analysis of
California Pizza Kitchen

Course (506): Cases in Financial Decision Making

SUBMITTED TO:
Dr. M. Sadiqul Islam
Professor
Department of Finance
University of Dhaka

SUBMITTED BY:
Group 21
MBA 16th Batch
Department of Finance
University of Dhaka

Date of Submission
April 08, 2015

Group No: 21
Serial
Name
BBA ID
MBA ID
1
Farhana Bondhon
16-004
16-615
2
Farha Farzana
16-006
16- 727
3
Marufa Akhter
16-132
16- 657

Letter of Transmittal

April 08, 2015
Dr. M. Sadiqul Islam
Professor
Department of Finance
University of Dhaka

Subject: Submission of Report.

Sir,
With pleasure, we present to you the report on “case analysis of California Pizza Kitchen” for the fulfillment of the course “Cases in Financial
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The company had 213 locations in 28 states and 6 foreign countries after the 2nd quarter of 2007. It offers pizzas, pastas, soups, sandwiches, appetizers and desserts. The company also serves travelers on the go and sports fans by operating locations at airports, sports stadiums, and universities in the USA as well as sells its products through grocery stores. In addition, it provides catering for events by offering customized menus as well as enables ordering gift cards online. Further, CPK provides franchising opportunities internationally to companies that own full-service restaurant chains.

The case is intended to provide an introduction to the Modigliani and Miller capital structure irrelevance propositions and the concept of debt tax shields, effect of distress cost. The case serves to motivate some important objectives. Those are as follows:

1. Introduce the Modigliani-Miller intuition of capital structure irrelevance
2. Establish how the cost of equity is affected by capital structure decisions by defining financial risk and introducing the levered beta CAPM equation
3. Discuss interest tax deductibility and the valuation tax shields
4. Explore the importance of debt capacity in a growing business

California Pizza Kitchen has been operating since 1985 predominantly in California. As of June 2007, they had 213 retail locations in the US and abroad. In the second quarter of 2007, revenue increased 16% while
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