caseism

California Pizza Kitchen Case Solution & Answer

This Case is about FINANCIAL MANAGEMENT

PUBLICATION DATE: September 02, 2008 PRODUCT #: UV1203-PDF-ENG

This case analyzes the issue of fiscal leverage at California Pizza Kitchen (CPK) in July 2007. With an aversion to debt and an extremely lucrative company, CPK direction is contemplating a debt-financed stock buyback plan. The case is meant to provide the notion of debt tax shields and an introduction to Modigliani and Miller capital structure insignificance proposals. With the backdrop of a pizza business, the case provides an engaging context to discuss the “pizza graphs” that are popular in corporate finance program to exemplify the wealth effects of capital structure choices.

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