M&M Pizza Case SolutionÂ
The company has total capital $1000 million, which is total equity based and best for the financial performance of the company. As the company wants to increase capitalization, the company should issue shares in the market such as IPO (Initial Public Offering) because when the number of investors increase,then it would be beneficial for the company in order to increase equity.The company has planned to repurchase shares from potential investor that would shrink the size of the market. The company should reduce direct expenses to increase the profit. The expenses have direct impact on the profitability of M and M Pizza Company.The company has slow growth in profit which is $100 million and the share price has reduced to $25 as well as it is constantly. Decreasing raw material wastageÂ is another cost cutting tool for the company to increase net Income.The companyâ€™s current year operating cost is high, which is 92%.
It is concluded that the company has decreased share value, dividend per share and slow growth in profit because of the increase in Direct Expenses. The company is operating its business in Francostan, which is favorable for the company in which the Government has imposed Rules and regulations for improvement of economic conditions. The inflation rate is almost zero for the upcoming periods. The tax rate imposed on income is 20%. M and M pizza company wants to increase capital through LBO (Repurchase shares from Existing Investor) by offering Debt of $ 500 million. The company has planned to increase dividend on each share for investors and increase its share price and Profit. Moreover, the company has selected WACC method to evaluate its current position……………….
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