For this project, please try to use Excel to do calculations and analysis and then report in MS Word. Your report should clearly and thoroughly answer the below five questions. Submit your report (and Excel file) on Blackboard. All of this needs to be completed by the listed due date on the syllabus.Please use the project information to answer the following questions for your project report:

Q1. How does different debt levels change CPK' S ROE?

Q2. How does different debt levels change CPK' S Beta?

Q3. How does different debt levels change CPK' S WACC?

Q4. Estimate the effect of leverage on the stock-price and estimate the number of repurchased shares.

Q5. What capital structure should you recommend? Compare your recommendation to the reality, what is your conclusion?

Exhibit 9 CALIFORNIA PIZZA KITCHEN Pro Forma Tax Shield Effect of Recapitalization Scenarios (Dollars in thousands, except share data; figures based on end of June 2007) Debt/Total Capital Actual 10% 20% 30% Interest rate ⁽¹⁾ 6.16% 6.16% 6.16% 6.16% Tax rate 32.5% 32.5% 32.5% 32.5% Earnings before income taxes and interest⁽²⁾ 30,054 30,054 30,054 30,054 Interest expense 0 1,391 2,783 4,174 Earnings before taxes 30,054 28,663 27,271 25,880 Income taxes 9,755 9,303 8,852 8,400 Net income 20,299 19,359 18,419 17,480 Book value: Debt 0 22,589 45,178 67,766 Equity 225,888 203,299 180,710 158,122 Total capital 225,888 225,888 225,888 225,888 Market value: Debt⁽³⁾ 0 22,589 45,178 67,766 Equity⁽⁴⁾ 643,773 628,516 613,259 598,002 Market value of capital 643,773 651,105 658,437 665,769 Notes: ⁽¹⁾ Interest rate of CPK's credit facility with Bank of America:LIBOR + 0.80%. ⁽²⁾ EBIT includes interest income. ⁽³⁾ Market values of debt equal book values. ⁽⁴⁾ Actual market values of equity equals the share price ($22.10) multiplied by the current number of shares outstanding (29.13 million).

Exhibit 8 California Pizza Kitchen, Inc. Interest Rates and Yields U.S. Treasury Securities Average Average Bills Notes & Bonds Corporatebonds(Moody's) Prime LIBOR 3-month 6-month 3-year 10-year 30-year Aaa 3 Baa Lending 3-month 2000 5.85% 5.92% 6.22% 6.03% 5.94% 7.62% 8.36% 9.23% 6.55% 2001 3.45% 3.39% 4.09% 5.02% 5.49% 7.08% 7.95% 6.91% 3.63% 2002 1.62% 1.69% 3.10% 4.61% ...... 6.49% 7.80% 4.67% 1.79% 2003 1.02% 1.06% 2.10% 4.01% ...... 5.67% 6.77% 4.12% 1.22% 2004 1.38% 1.58% 2.78% 4.27% ...... 5.63% 6.39% 4.34% 1.67% 2005 3.16% 3.40% 3.93% 4.29% ...... 5.24% 6.06% 6.19% 3.63% 2006: Jan. 4.20% 4.30% 4.35% 4.42% ...... 5.29% 6.24% 7.38% 4.68% Feb. 4.41% 4.51% 4.64% 4.57% 4.54% 5.35% 6.27% 7.50% 4.82% Mar. 4.51% 4.61% 4.74% 4.72% 4.73% 5.53% 6.41% 7.63% 4.99% Apr. 4.59% 4.72% 4.89% 4.99% 5.06% 5.84% 6.68% 7.75% 5.15% May. 4.72% 4.81% 4.97% 5.11% 5.20% 5.95% 6.75% 7.88% 5.23% June 4.79% 4.95% 5.09% 5.11% 5.15% 5.89% 6.78% 7.13% 5.51% July 4.96% 5.09% 5.07% 5.09% 5.13% 5.85% 6.76% 8.25% 5.49% Aug. 4.98% 4.99% 4.85% 4.88% 5.00% 5.68% 6.59% 8.25% 5.40% Sept. 4.82% 4.90% 4.69% 4.72% 4.85% 5.51% 6.43% 8.25% 5.37% Oct. 4.89% 4.91% 4.72% 4.73% 4.85% 5.51% 6.42% 8.25% 5.37% Nov. 4.95% 4.96% 4.64% 4.60% 4.69% 5.33% 6.20% 8.25% 5.37% Dec. 4.85% 4.88% 4.58% 4.56% 4.68% 5.32% 6.22% 8.25% 5.36% 2007: Jan. 4.96% 4.94% 4.79% 4.76% 4.85% 5.40% 6.34% 8.25% 5.36% Feb. 5.02% 4.97% 4.75% 4.72% 4.82% 5.39% 6.28% 8.25% 5.36% Mar. 4.97% 4.90% 4.51% 4.56% 4.72% 5.30% 6.27% 8.25% 5.35% Apr. 4.88% 4.87% 4.60% 4.69% 4.87% 5.47% 6.39% 8.25% 5.36% May. 4.77% 4.80% 4.69% 4.75% 4.90% 5.47% 6.39% 8.25% 5.36% June 4.63% 4.77% 5.00% 5.10% 5.20% 5.79% 6.70% 8.25% 5.36%

Exhibit 7 California Pizza Kitchen, Inc. Comparative Restaurant Financial Data, 2006 Fiscal Year (in millions, except per-share data) Fiscal Year End 7/2/2007 EBITDA Net Profit Earnings Dividends BookValue Month Share Price Revenue Margin Margin Per Share Per Share Per Share Beta California Pizza Kitchen Dec. $22.10 $555 10.7% 3.8% $0.71 $0.00 $7.20 0.85 Applebee's International, Inc. Dec. 24.28 1,338 15.9% 6.5% 1.17 0.20 6.49 0.80 BJ's Restaurants, Inc. Dec. 20.05 239 9.6% 4.1% 0.41 0.00 7.78 1.05 Brinker International⁽¹⁾ June 29.37 4,151 12.0% 4.7% 1.49 0.20 8.59 0.90 Buffalo Wild Wings, Incorporated Dec. 41.78 278 13.3% 5.8% 0.93 0.00 6.61 1.10 The Cheesecake Factory, Inc. Dec. 24.57 1,315 12.2% 6.2% 1.02 0.00 9.09 1.00 Chipotle Mexican Grill, Inc. Dec. 86.00 823 13.0% 5.0% 1.28 0.00 14.56 NA Darden Restaurants, Inc.⁽²⁾ May 44.14 5,721 13.2% 5.9% 2.16 0.40 8.37 1.00 Frisch's Restaurants, Inc. May 30.54 291 31.6% 3.1% 1.78 0.44 19.84 0.60 McCormick & Schmick's Dec. 25.66 308 9.7% 4.3% 0.92 0.00 11.20 1.10 Panera Bread Company Dec. 46.02 829 16.3% 7.2% 1.87 0.00 12.53 1.25 P.F. Chang's China Bistro Dec. 35.37 938 10.5% 3.6% 1.24 0.00 11.41 1.10 RARE Hospitality International Inc.⁽³⁾ Dec. 26.76 987 11.6% 5.1% 1.45 0.00 11.17 0.57 Red Robin Gourmet Burgers Dec. 40.19 619 13.7% 4.9% 1.82 0.00 14.68 1.05 Ruth's Chris Steak House, Inc. Dec. 16.80 272 15.6% 8.7% 1.01 0.00 2.93 NA Sonic Corporation Aug. 22.00 693 24.9% 11.4% 0.88 0.00 4.66 0.90 Texas Roadhouse, Inc. Dec. 12.81 597 12.5% 5.7% 0.44 0.00 4.30 0.90 Current Current Total Shr. Debt/ Interest T. Capital Return On Assets Liabilities Debt Equity Capital Coverage Turnover Capital Equity California Pizza Kitchen $38 $66 $0 $208 0.0% NMF 2.7 10.1% 10.1% Applebee's International, Inc. 105 187 175 487 26.5% 11.7 2.0 14.0% 18.0% BJ's Restaurants, Inc. 96 36 0 203 0.0% NMF 1.2 4.9% 4.9% Brinker International⁽¹⁾ 242 497 502 1,076 31.8% 14.4 2.6 13.2% 18.0% Buffalo Wild Wings, Incorporated 75 26 0 116 0.0% NMF 2.4 14.0% 14.0% The Cheesecake Factory, Inc. 203 163 0 712 0.0% NMF 1.8 11.4% 11.4% Chipotle Mexican Grill, Inc. 179 61 0 474 0.0% NMF 1.7 8.8% 8.7% Darden Restaurants, Inc.⁽²⁾ 378 1,026 645 1,230 34.4% 10.9 3.1 20.6% 27.5% Frisch's Restaurants, Inc. 12 31 43 101 30.1% 5.9 2.0 7.9% 9.1% McCormick & Schmick's 30 40 0 160 0.2% NMF 1.9 8.3% 8.3% Panera Bread Company 128 110 0 398 0.0% NMF 2.1 15.1% 15.1% P.F. Chang's China Bistro 65 104 19 290 6.2% NMF 3.0 11.1% 11.5% RARE Hospitality International Inc.⁽³⁾ 125 134 166 360 31.6% 29.2 1.9 9.8% 13.9% Red Robin Gourmet Burgers 29 70 114 244 31.9% 7.7 1.7 9.3% 12.5% Ruth's Chris Steak House, Inc. 26 59 68 68 50.0% 12.8 2.0 18.6% 34.9% Sonic Corporation 43 78 159 392 28.9% 15.0 1.3 15.3% 20.1% Texas Roadhouse, Inc. 53 78 36 319 10.2% 19.9 1.7 9.7% 10.7% Notes: ⁽¹⁾ Brinker's restaurant brands include Chili's Grill & Bar, Romano's Macaroni Grill, On The Border and Maggiano's. ⁽²⁾ Darden's restaurant brands include Red Lobster and The Olive Garden. ⁽³⁾ RARE's restaurant brands include LongHorn Steakhouse, The Capital Grille and Bugaboo Creek Steak House.

Exhibit 5 California Pizza Kitchen, Inc. Selected Forecasts for California Pizza Kitchen Date of Price 2007E 2008E 2009E Firm Report Target Revenues EPS Revenues EPS Revenues EPS Oppenheimer and Co. Inc. 4/9/2007 $40 $652.9 $1.33 NA NA NA NA CIBC World Markets 4/12/2007 37 647.5 1.29 755.1 1.57 NA NA KeyBanc Capital Markets 5/11/2007 NA NA 1.28 NA 1.55 NA NA RBC Capital Markets 5/11/2007 37 650.7 1.31 753.1 1.59 878.2 1.90 Morgan Keegan & Co., Inc. 5/11/2007 NA 644.2 1.33 742.1 1.58 NA NA MKM Partners 5/11/2007 39 647.5 1.34 754.3 1.69 NA NA

Exhibit 4 California Pizza Kitchen, Inc. Selected Historical Comparable Store Sales (Calendarized) CY06 CY07 CY03 CY04 CY05 Q1 Q2 Q3 Q4 Q1 California Pizza Kitchen 3.4% 9.3% 6.4% 4.8% 5.9% 5.6% 6.9% 4.7% Applebee's International, Inc. 4.1% 4.8% 1.8% 2.6% -1.8% -2.3% -1.1% -4.0% BJ's Restaurants, Inc. 3.3% 4.0% 4.6% 6.8% 5.9% 5.3% 5.5% 6.9% Brinker International⁽¹⁾ 2.1% 1.9% 3.2% 2.7% -2.0% -2.1% -2.1% -4.4% The Cheesecake Factory, Inc. 0.7% 3.9% 1.7% -1.3% -0.8% -1.6% 0.8% 0.4% Chipotle Mexican Grill, Inc. 24.4% 13.3% 10.2% 19.7% 14.5% 11.6% 10.1% 8.3% Darden Restaurants, Inc. -- Red Lobster 0.0% -3.9% 4.2% 1.6% 9.4% -2.1% 0.7% 4.6% Darden Restaurants, Inc. -- Olive Garden 2.2% 4.7% 8.6% 5.7% 2.5% 2.9% 2.9% 1.0% McCormick & Schmick's Seafood Restaurants, Inc. 1.1% 3.8% 3.0% 4.1% 2.8% 2.9% 2.0% 2.8% Panera Bread Company 0.2% 2.7% 7.8% 9.0% 3.2% 2.8% 2.0% 0.0% P.F. Chang's China Bistro 5.1% 3.0% 1.2% 1.3% -1.0% -0.5% -0.9% -2.5% RARE -- Longhorn Steakhouse 4.6% 5.0% 2.8% 3.7% -0.4% -0.3% 1.5% -1.0% Red Robin Gourmet Burgers 4.1% 7.5% 3.8% 4.8% 3.3% 0.8% 0.2% -0.5% Ruth's Chris Steak House, Inc. 1.4% 11.6% 10.4% 6.8% 6.0% 4.3% 7.4% 1.9% Sonic Corporation 1.6% 7.0% 5.4% 5.5% 4.3% 4.0% 3.4% 2.0% Texas Roadhouse, Inc. 3.5% 7.6% 5.6% 6.4% 1.2% 2.3% 3.3% 0.9%

Exhibit 3 California Pizza Kitchen, Inc. Consolidated Income Statements (in thousands, except per-share data) Fiscal Year⁽¹⁾ Three Months Ended 2003 2004 2005 2006 7/2/2006 7/1/2007 Restaurant sales $356,260 $418,799 $474,738 $547,968 $134,604 $156,592 Franchise and other revenues 3,627 3,653 4,861 6,633 1,564 1,989 Total revenues 359,887 422,452 479,599 554,601 136,168 158,581 Food, beverage and paper supplies 87,806 103,813 118,480 135,848 33,090 38,426 Labor 129,702 152,949 173,751 199,744 49,272 56,912 Direct operating and occupancy 70,273 83,054 92,827 108,558 26,214 30,773 Cost of Sales 287,781 339,816 385,058 444,150 108,576 126,111 General and administrative 21,488 28,794 36,298 43,320 11,035 12,206 Depreciation and amortization 20,714 23,975 25,440 29,489 7,070 9,022 Pre-opening costs 4,147 737 4,051 6,964 800 852 Severance charges⁽²⁾ 1,221 Loss on impairment of PP&E 18,984 1,160 Store closure costs 2,700 152 707 768 Legal settlement reserve 1,333 600 Operating income 5,552 25,097 26,840 29,971 8,687 9,622 Interest income 317 571 739 718 287 91 Other income 1,105 Equity in loss of unconsolidated JV (349) (143) (22) Total other income (expense) (32) 428 1,822 718 287 91 Income before income tax provision 5,520 25,525 28,662 30,689 8,974 9,713 Income tax provision (benefit) (82) 7,709 9,172 9,689 2,961 3,393 Net income $5,602 $17,816 $19,490 $21,000 $6,013 $6,320 Net income per common share: Basic $0.30 $0.93 $1.01 $1.08 $0.20 $0.22 Diluted $0.29 $0.92 $0.99 $1.06 $0.20 $0.21 Selected Operating Data: Restaurants open at end of period 168 171 188 205 193 213 Company-owned open at end of period⁽³⁾ 137 141 157 176 162 182 Avg weekly full service rest. sales⁽³⁾ $54,896 $57,509 $62,383 $65,406 $65,427 $68,535 18-mo. comparable rest. sales growth⁽³⁾ 3.4% 8.0% 7.5% 5.9% 4.8% 5.4% Notes: ⁽¹⁾ For the Years Ended December 31, 2006, January 1, 2006 and January 2, 2005, December 28, 2003. ⁽²⁾ Severance charges represent payments to former President/CEO and former SVP/Senior Development Officer under terms of their separation agreements. ⁽³⁾ Data for company-owned restaurants.

Exhibit 2 California Pizza Kitchen, Inc. Consolidated Balance Sheet (in thousands) As of 1/1/2006 12/31/2006 7/1/2007 Assets Current assets Cash and cash equivalents $11,272 $8,187 $7,178 Investments in marketable securities 11,408 Other receivables 4,109 7,876 10,709 Inventories 3,776 4,745 4,596 Current deferred tax asset, net 8,437 11,721 11,834 Prepaid income tax 1,428 8,769 Other prepaid expenses & other current assets 5,492 5,388 6,444 Total current assets 45,922 37,917 49,530 Property and equipment, net 213,408 255,382 271,867 Noncurrent deferred tax asset, net 4,513 5,867 6,328 Goodwill and other intangibles 5,967 5,825 5,754 Other assets 4,444 5,522 6,300 Total assets $274,254 $310,513 $339,779 Liabilities and Shareholders' Equity Current liabilities Accounts payable $7,054 $15,044 $14,115 Accrued compensation and benefits 13,068 15,042 15,572 Accrued rent 13,253 14,532 14,979 Deferred rent credits 4,056 4,494 5,135 Other accrued liabilities 9,294 13,275 13,980 Accrued income tax 3,614 9,012 Total current liabilities 46,725 66,001 72,793 Other liabilities 5,383 8,683 8,662 Deferred rent credits, net of current portion 24,810 27,486 32,436 Shareholders' equity: Common stock 197 193 291 Additional paid-in-capital 231,159 221,163 228,647 Accumulated deficit (34,013) (13,013) (3,050) Accumulated comprehensive loss (7) Total shareholders' equity 197,336 208,343 225,888 Total liabilities & Shareholders' Equity $274,254 $310,513 $339,779