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Enter
your answers to each of the five case studies below each case study, adding
additional pages as required.
Statement of Student Responsibility
By submitting any piece of work you agree
that:
1.
The work is your own work or the work of the
group.
2.
You have made a reasonable contribution to the
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3.
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4.
You have read and agreed to be bound by the Statutes,
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available at www.latrobe.edu.au/learning/integrity.html; and
5.
You may be subject to student discipline processes
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Plagiarism means the reproduction of someone
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proper acknowledgement and includes:
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Direct copying or paraphrasing from someone
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the source;
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Producing assignments (required to be
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Assisting another person to commit an act of
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Case
Study 1
FACT SET
·
Go to yahoofinance.com.au and obtain the closing adjusted price
for Domino Pizza Enterprises Limited on the 30th June for each year
from 2010 to 2015.
·
Go to yahoofinance.com.au and obtain the dividends paid by Domino
Pizza Enterprises Limited between 30th June 2010 and 30th
June 2015.
·
Go to yahoofinance.com.au and obtain the closing adjusted price
for Retail Food Group Limited on the 30th June for each year from
2010 to 2015.
·
Go to yahoofinance.com.au and obtain the dividends paid by Retail
Food Group Limited between 30th June 2010 and 30th June
2015.
TASKS
1. Calculate
the Holding Period Return for each company for each year from 30th
June 2010 to 30th June 2015.
2. Estimate the
Expected Return of each company based on your five-year historical sample of
returns.
3. Estimate the
risk of each company based on your five-year historical sample of returns.
4. Calculate
the Total Return to Shareholders of each company over the five-year period from
30th June 2010 to 30th June 2015, using the following
formula:
5. Compare and
contrast the share price performance of each company.
TOTAL MARKS
Case Study 2
· FACTS SET
·
Jane Fleming is considering investing in a new cupcakes franchise
business. Jane has provided you with the
following data
o
Market research suggests you can sell the cupcakes for an average
price of $3 each.
o
Under the franchise agreement she would have to pay a royalty payment
equal to 8% of sales.
o
She would also have to contribute 5% of sales towards the
marketing costs of the franchisor.
o
Cost of ingredients per
cupcake is $0.38
o
Weekly rental $350, plus annual outgoings of $3,500.
o
Wages: Shop assistant $16
per hour; baker $17 per hour
o
Superannuation: 9.5% of wages
·
Assume the shop assistant and the baker work for 8 hours per day,
for 252 days of the year.
TASKS
1. What is the
contribution margin?
2. How many
cupcakes must Jane sell in a year in order to break even?
3. If you can
sell all the cakes the baker can produce in an eight-hour shift (144 cupcakes)
each day for 252 days of the year, what will be the annual pre-tax profit
before tax?
4. If you
increase your average selling price to $3.70, which has the effect of reducing
the amount you are able to sell from 144 per day to 134 per day, what will be
your annual pre-tax profit or loss?
5. If you
reduce the selling price to $2.70 and employ an extra baker (producing at the
same rate per 8-hour shift) in order to cater for the extra demand at the lower
price, and if you wish to earn a pre-tax profit of $10,000 per annum, how many
would you need to sell per year?
TOTAL MARKS
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Case
Study 3
FACTS SET
·
Jane Fleming is considering investing in a new cupcakes franchise
business. Jane has provided you with the
following data on which to estimate the financial viability of the business
using an NPV analysis.
o
Jane decides to pursue a low price volume model, pricing the cakes
at $2.70, at which 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 and
subsequent years.
o
Under the franchise agreement she would have to pay a royalty
payment, or commission, equal to 8% of sales.
o
She would also have to contribute 5% of sales towards the
marketing costs of the franchisor.
o
Cost of ingredients per
cupcake is $0.38
o
Weekly rental $350, plus annual outgoings of $3,500.
o
Wages: Shop assistant $16
per hour; baker $17 per hour
o
Superannuation: 9.5% of wages
·
Assume the single shop assistant and the two bakers 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. Calculate
the years to discounted payback of the initial investment.
2. Calculate
the Net Present Value of the business, assuming the business is sold at the end
of the third year for $150,000.
3. Calculate
the Profitability Index, assuming the business is sold at the end of the third
year for $150,000.
4. Based on the
NPV you have calculated for the investment, would you recommend to Jane that
the investment is financially viable?
5. Consider the
risks of establishing a cupcake business as described in http://www.forbes.com/sites/allbusiness/2013/09/30/7-business-lessons-from-gourmet-cupcakes/. What advice might you offer Jane to modify
her business plan to reduce its exposure to such risks?
TOTAL MARKS
·
20
Case
Study 4
FACT SET
·
Go to the Domino Pizza Enterprise Ltd website and obtain the
Income Statement and Balance Sheet for the company for the 2014/15 financial
year.
·
Go to Retail Food Group Limited website and obtain the Income
Statement and Balance Sheet for the company for the 2014/15 financial year.
TASKS
1. Based on the
information contained in these statements calculate for each company:
a. The annual
growth in Earnings per Share (Net Profit divided by the number of Ordinary
Shares on Issue) over the five years to 30th June 2015.
b. The Net
Profit Margin, Asset Turnover Ratio, Leverage Ratio and Return on Equity for
the company for the 2014/15 financial year.
c. The Quick
Ratio and the Net Debt to Equity Ratio as at the end of the 2014/15 financial
year.
2. Compare and
contrast the financial performance of the two companies over the past 5 years.
3. Use your
analysis of the financial performance of the two companies over the past 5
years to explain any difference in the Total Return to Shareholders over the
past 5 years, which you have calculated in Case Study 2.
TOTAL MARKS
·
20
Case
Study 5
FACT SET
·
Go to www.asx.com.au and look up the prices for Dominos Pizza
Enterprise Limited (DMP.AU) and Retail Food Group Limited (RFG.AU) in the
Search field at the top right of the screen.
TASKS
1. In Table 1,
enter the date and last price of each stock, then calculate the market cap,
current P/E, and current dividend yield for each stock based on the last price.
2. In Table 2,
provide a definition explaining each data item.
3. Compare and
contrast the current market value of each stock.
TOTAL MARKS
·
20
Table 1
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DMP
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RFG
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Date
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Last Price (AUD)
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Shares Outstanding (M)
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87m
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Market Cap (B AUD)
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Earnings Per Share (AUD) (TTM)
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$0.74
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Current P/E Ratio (TTM)
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Dividend (AUD) (TTM)
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$0.518
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Current Dividend Yield (%)
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Table 2
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Definition/Explanation
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Last Price (AUD)
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Shares Outstanding (M)
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Market Cap (B AUD)
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Earnings Per Share (AUD) (TTM)
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Current P/E Ratio (TTM)
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Dividend (AUD) (TTM)
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Current Dividend Yield (%)
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