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    California Pizza Kitchen

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    Marvi Ahmad
    The document contains 4 exhibits showing calculations related to return on equity, cost of equity, weighted average cost of capital, and share price and earnings per share for a company under different leverage scenarios. Exhibit 1 shows actual and projected financial statements. Exhibit 2 calculates cost of equity using CAPM. Exhibit 3 calculates WACC. Exhibit 4 shows the impact of different leverage levels on share price and EPS.

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    California Pizza Kitchen

    Uploaded by

    Marvi Ahmad
    858 views4 pages
    The document contains 4 exhibits showing calculations related to return on equity, cost of equity, weighted average cost of capital, and share price and earnings per share for a company under different leverage scenarios. Exhibit 1 shows actual and projected financial statements. Exhibit 2 calculates cost of equity using CAPM. Exhibit 3 calculates WACC. Exhibit 4 shows the impact of different leverage levels on share price and EPS.

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    The document contains 4 exhibits showing calculations related to return on equity, cost of equity, weighted average cost of capital, and share price and earnings per share for a company under different leverage scenarios. Exhibit 1 shows actual and projected financial statements. Exhibit 2 calculates cost of equity using CAPM. Exhibit 3 calculates WACC. Exhibit 4 shows the impact of different leverage levels on share price and EPS.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    858 views4 pages

    California Pizza Kitchen

    Uploaded by

    Marvi Ahmad
    The document contains 4 exhibits showing calculations related to return on equity, cost of equity, weighted average cost of capital, and share price and earnings per share for a company under different leverage scenarios. Exhibit 1 shows actual and projected financial statements. Exhibit 2 calculates cost of equity using CAPM. Exhibit 3 calculates WACC. Exhibit 4 shows the impact of different leverage levels on share price and EPS.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 4

    Exhibit-1

    Return on Equity
    Debt/Total Capital (Leverage)
    Net Income
    Book Values
    Debt
    Equity
    Total Capital
    Market Values
    Debt
    Equity
    Market Value of Capital
    Tax rate
    Return on Equity

    Exhibit-2

    in 000s
    Actual

    in 000s
    10%

    20,299

    19,359

    225,888
    225,888

    22,589
    203,299
    225,888

    643,773
    643,773
    32.50%

    22,589
    628,516
    651,105
    32.50%

    8.99%

    9.52%

    Cost Of Equity
    Debt/Total Capital (Leverage)
    Beta of Asset (Ba)
    Beta of Equity (Be)
    Risk Free Rate (Rf)
    Return on Market (Rm)
    Market Risk Premium (Rm-Rf)
    Cost Of Equity (Rs)

    Actual

    10%

    0.85
    0.850
    5.20%
    9.00%
    3.80%
    8.43%

    0.85
    0.871
    5.20%
    9.00%
    3.80%
    8.51%

    in 000s
    20%

    in 000s
    30%

    18,419

    17,480

    45,178
    180,710
    225,888

    67,766
    158,122
    225,888

    45,178
    613,259
    658,437
    32.50%

    67,766
    598,002
    665,768
    32.50%

    10.19%

    11.05%

    Formula:
    Beta of Equity:
    Be = Ba*[1+(1-t)B/S]

    20%

    30%

    0.85
    0.892
    5.20%
    9.00%
    3.80%
    8.59%

    0.85
    0.915
    5.20%
    9.00%
    3.80%
    8.68%

    Cost of Equity using CAPM:


    Rs = Rf+Be*(Rm-Rf)

    Exhibit-3

    Calculation of WACC
    Debt/Total Capital (Leverage)
    Cost of Equity (Rs)
    Cost of Debt (Rb)
    Weight of Equity (ws)
    Weight of Debt (wb)
    Tax rate
    (1-t)
    WACC

    Exhibit-4

    Actual

    10%

    8.43%
    6.16%
    100%
    0%
    32.50%
    67.50%
    8.43%

    8.51%
    6.16%
    96.53%
    3.47%
    32.50%
    67.50%
    8.36%

    in 000s
    Actual

    in 000s
    10%

    Share Price and EPS


    Debt/Total Capital (Leverage)
    No. of Shares
    Market Value of Capital
    New Share Price (after announcemen
    Debt
    Shares repurchased
    Shares Outstanding
    Earning per share (EPS)

    29,130
    643,773
    22.10
    29,130.00
    0.70

    29,130
    651,105
    22.35
    22,589
    1,010.62
    28,119.38
    0.69

    20%

    30%

    8.59%
    6.16%
    93.14%
    6.86%
    32.50%
    67.50%
    8.29%

    8.68%
    6.16%
    89.82%
    10.18%
    32.50%
    67.50%
    8.22%

    in 000s
    20%

    in 000s
    30%

    29,130
    658,437
    22.60
    45,178
    1,998.73
    27,131.27
    0.68

    29,130
    665,768
    22.86
    67,766
    2,965.03
    26,164.97
    0.67

    Using market value weights

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