Panera food Forecast

The following questions should support your analysis of the case and help structuring the so-

lution. Please formulate your solution in up to 10 pages (Times New Roman 12pt, spacing

1.5, margins 2.5 at all sides). Also be prepared to verbally present your arguments and results

in class and discuss it with the other groups.

There is no unique correct solution. The quality of your solution depends on the depth of your

analysis and the clarity and correctness of your arguments.

Panera Bread Company

Key Questions:

1. Complete the financing portion of Panera Bread Company’s 2007 forecast financial

statements, and provide a forecast for the next five years. A worksheet has been provid-

ed for this purpose. As a base case assume sales growth of 25% for the first two years

after 2007 and 5% thereafter. All relevant cost figures and future balance sheet entries

can be estimated and forecasted as a percentage of sales. Use the past figures as guid-

ance for your forecast on these percentages. In your initial (base case) analysis, assume

all necessary financings are raised by a line of credit (debt). Net income is fully retained

and increases equity in the subsequent period (no dividend payments). Assume the share

repurchase occurs in 2008 and that interest expense is equal to 6% of outstanding debt.

2. Describe the development of the debt position in your financial forecast. Explore the

impact of different assumptions regarding the development of sales and costs. Compare

the resulting debt levels of Panera Bread Company with comparable firms and com-

ment.

3. Given the need for external sources of capital, please contrast the desirability of the

three financing options external equity, a long-term note payable, and a short-term re-

volving line of credit. Discuss the advantages and disadvantages of these possibilities.

4. Give a recommendation for Panera Bread’s future financing based on the general char-

acteristics of the financing options (a detailed analysis of cost of capital is not neces-

sary).

Please find the case data in the Excel Sheet “PaneraBread.xls” (available in Moodle).