Reference no: EM132304365
Case Study
FACT SET
• Go to yahoofinance and obtain:
o the closing adjusted price for Domino Pizza Enterprises Limited on the 30 June for each year from 2013 to 2018.
o the dividends paid by Domino Pizza Enterprises Limited between 30 June 2013 and 30 June 2018.
o the closing adjusted price for Retail Food Group Limited on the 30 June for each year from 2013 to 2018.
o the dividends paid by Retail Food Group Limited between 30 June 2013 and 30 June 2018.
• Go to the Domino Pizza Enterprise Ltd website and obtain the annual report (i.e. the Income Statement and Balance Sheet) for the company for the 2017/18 financial year.
• Go to Retail Food Group Limited website and obtain the annual report (i.e. the Income Statement and Balance Sheet) for the company for the 2017/18 financial year.
TASKS
1. Calculate the Holding Period Return for each company for each year from 30 June 2013 to 30 June 2018.
2. Estimate the Expected Return of each company based on your five-year historical sample of returns.
3. Calculate the Total Return to Shareholders of each company over the five-year period from 30 June 2013 to 30 June 2018, using the following formula:
[P5 + (D1-5)/P0](1/5) -1
4. Compare and contrast the performance of each company over the past five years, based on the change in share prices.
5. Based on the information contained in the following tables and the 2018 Annual Reports, calculate for each company the annual growth in Earnings per Share; Net Profit Margin; Asset Turnover Ratio; Leverage Ratio; Return on Equity; Quick Ratio and Net Debt to Equity Ratio for the 2017/18 financial year.
6. Compare and contrast the performance of the two companies over the past five years by examining the following ratios.
a. Profitability (Growth in EPS and Net Profit Margin)
b. Efficiency (Asset Turnover Ratio)
c. Liquidity (Quick Ratio)
d. Solvency (Leverage Ratio and Net Debt to Equity Ratio)
Case Study 2
FACT SET
• Janet Fleming is considering investing in a new cupcakes franchise business. Janet has provided you with the following data on which to estimate the financial viability of the business using an NPV analysis.
– Janet decides to price the cakes at $3.00. She estimates she will be able to sell 70,000 cakes in the first year, 80,000 in the second year and 90,000 in the third year.
– Under the franchise agreement, she will have to pay a royalty payment equal to 8% of sales.
– She will also have to contribute 5% of sales towards the marketing costs of the franchisor.
– Cost of ingredients per cupcake is $0.38.
– Weekly rental $350. Annual outgoings are $3,500.
– Wages: Shop assistant $16 per hour; baker $17 per hour.
– Superannuation: 9.5% of wages.
• Assume that one shop assistant and one baker each work for 8 hours per day, for 252 days of the year.
• Assume no inflation in prices or wages.
• Assume a 30% tax rate.
• The initial investment in fittings and equipment is $200,000.
• You estimate the cost of capital to be 16%.
TASKS
1. What is the contribution margin?
2. How many cupcakes must Jane sell in a year in order to break even?
3. If Janet can sell all the cakes the baker can produce in an eight-hour shift (that is, 144 cupcakes) each day for 252 days of the year, what will be the annual profit before tax?
4. Calculate the Net Profit per year, assuming that Janet is able to sell 70,000 cakes in the first year, 80,000 in the second year and 90,000 in the third year.
5. Calculate the Net Present Value of the business, assuming the business is sold at the end of the third year for $150,000. In this Case Study, assume that Net Profit is equivalent to Free Cash Flow.
6. Calculate the Profitability Index, assuming the business is sold at the end of the third year for
$150,000.
7. Based on the NPV you have calculated for the investment, would you recommend to Janet that the investment is financially viable? Justify your recommendation.
Attachment:- Dollars and Sense.rar