2) The factors that CIBC analysts examine to forecast sales growth for KKD in the years ended January

2003 and 2004 are: The forecast was created by using per store info Krispy Kreme to open 62 new stores in 2003, mostly franchise stores. Glass and Farmer were able to forecast Krispy Kremes revenues and margins for its three core businesses (store sales, franchise operations, and sales of mix and equipment). Based on this analysis, they predicted that Krispy Kreme would report earnings per share of $0.64 for the year ended January 2003 and $0.83 for the January 2004 year. These forecasts represented projected earnings growth of 42% and 33% for the next two years, respectively, virtually identical to consensus predictions for all analysts covering Krispy Kreme. KKM&D revenues are driven by franchisee revenues, since sales are to franchisees and will vary with their volume. They have averaged 33% of franchise sales in last two years. 4) The companys management anticipated that to achieve its planned growth it would have to continue to invest aggressively in both long-term assets and working capital. The working capital rate increases from 2.3% to 4.4% given the projected 25% growth in sales. Assuming this increase will continue the working capital should be 4% the sales. FEB. 3, 2002 FEB. 2, 2003

Beginning net working capital (4% of sales)

21,142

24,805

In year 2001 and 2002 beginning long-term assets have increased as a percentage of sales from 20% to 25%. For 2003, the beginning long-term assets to sales ratio will be 30% give the projected growth in sales and the historical data. Assume this rate will increase with the same rate it did the last two year ago: the beginning long-term assets will be:

FEB. 3, 2002

FEB. 3, 2003

Beginning long-term assets (30% of sales)

146,950

186,038

FEB. 3, 2002 Operating Assets Beginning net working capital Beginning long-term assets 21,142 146,950 168,092

FEB. 3, 2003

24,805 186,038 210,843

Net Capital Net debt Common equity -19,575 187,667 168,092 0 210,843 210,843