Reason of the issues Issues

1. Governement increased the labor cost rising food input, labor, and energy costs

Agenda "staying in power" need strong capital

expenditure

Stock split in form of dividend (3 for 2 shares)

stock split in form of dividend (3 for 2 shares) 10% decrease in share price $22.1

cost of sales are increasing

Revenues

1. Sale at their own resturent 2.Royalties dee

from the franchises
3. Royalties for the froze pizzas sold in the
super mkts
Possible solutions
1. as the are the market leader on cost the have the margin to increase
its price appropriately
2. Replacing slow sale items and changing them with new items

1. did not benefit from financial leverage in the form of tax sheild (One
gain from the leverage by using ita line of creditwould be to reduce the
corporate income-tax liability, which had been almost $10 million in
2006
2. the can use their line of credit which is $75M @ 6.16%

1. share repurchase (as this is the ideal time to purchase since the prices
are down)
2. 2007 Quaterly profit over 6 million (we can use the reatined earning
as well for the repurchase)
we need to adjust jour prices accordingly as they are the market leaders
in pricing
book value paidup capital + RE / no of share o
pretax margin (EBIT/Revenue)
pital + RE / no of share outstanding