Krispy kreme kkd has achieved spectacular growth in the

Reference no: EM13363684

Krispy Kreme (KKD) has achieved spectacular growth in the last few years using an area developer model to expand geographically. This case examines the factors that have driven its growth and their sustainability in the coming two years.

You are provided with forecasts made by financial analysts at CIBC. You are then asked to identify and evaluate the assumptions underlying these earnings forecasts. Since the CIBC report does not provide a forecasted balance sheet for KKD, you should develop one. Other important issues in the case include the potential conflicts of interest between analysts and investors that might lead analysts to over-sell a growth firm such as KKD.

Assigned Case Questions:

1. Analysts are predicting that Krispy Kreme will be able to perform highly effectively and continue to grow rapidly in the coming two years. Do you agree with their analysis? If so, why? If not, why not?

2. What factors did the CIBC analysts examine to forecast sales growth for KKD in the years ended January 2003 and 2004? What assumptions did they implicitly make about number of new stores and weekly sales per store (for both company and franchise stores)? What are their implicit assumptions about revenue growth from franchise operations and KKM&D? Do you agree with these forecasts?

3. Explain what are the NOPAT margins that the CIBC analysts have forecasted for KKD for the years ended January 2003 and 2004? What assumptions were made about specific expense items (e.g. margins, G&A, D&A, taxes)? Do you agree with these forecasts?

4. The CIBC analysts do not forecast KKD's balance sheet for the following year (ended January 2003). Make your own balance sheet forecasts.

5. In general, do you expect analysts' forecasts for a company like KKD to be optimistic, pessimistic or unbiased? Why?

Reference no: EM13363684

Questions Cloud

1000 par value bond is currently valued at 103353 the bond : 1000 par value bond is currently valued at 1033.53. the bond pays interest semi-annually has 6 years to maturity and

1 horizontal and vertical analysis of the income statements : 1 horizontal and vertical analysis of the income statements for the past three years all yearly balances set as a

1aqampq has ebit of 2million total assets of 10000 : 1.aqampq has ebit of 2million total assets of 10000 stockholders equity of 4 million and pretax interest expense of 10

You have a preferred stock which has a callability feature : you have a preferred stock which has a callability feature after 10 years at 115.the dividend annually is 10. your

Krispy kreme kkd has achieved spectacular growth in the : krispy kreme kkd has achieved spectacular growth in the last few years using an area developer model to expand

1 in late 2000 lucent announced that revenues would be : 1. in late 2000 lucent announced that revenues would be adjusted downwards by 679 million as a result of revenue

What are the reasons for a firm having lower cash from : what are the reasons for a firm having lower cash from operations than working capital from operations? what are the

In 2005 ibm had a return on equity of 267 percent whereas : in 2005 ibm had a return on equity of 26.7 percent whereas hewlett-packards return was only 6.4 percent. use the

The cigarette industry is subject to litigation for health : the cigarette industry is subject to litigation for health hazards posed by its products. the industry has been

User Account

All Pages