Select any publicly traded hospitality firm (except Disney). The instructor must approve the firm selected by each group.

Assignment 1 – Sizing up your firm (be guided by the methodology in chapter 2) –

• Compute the common-sized income statements for past 3 years (2021, 2020, 2019)
• Compute the financial ratios needed to evaluate the firm’s financial performance using the Dupont decomposition (Figure 2.3 page 62) for the past 3 years.
• Analyze the firm’s performance using the Dupont methodology. Your analysis will include the computations of the ratios and the common-sized income statements and a discussion of the elements that significantly impacted (positively and negatively) the firm’s performance (ROE).

You can download the firm’s financial statements from the library’s database Mergent On-line (use the standardized format, this is simpler than the as reported format) or from the SEC filings (10K).

Assignment 2- Projecting your firm’s future performance – Due April 17 2022.

• Create proforma income statements and balance sheets for the next year (use the spreadsheet from the Proforma Statement assignment)
• Perform appropriate sensitivity analysis and alternate scenarios, by varying the growth rate in sales and working capital variables (Accounts Receivables, Inventory and Accounts Payable percentages).

Your analysis will include a comparison between the debt level from the base case (i) and those in the sensitivity/scenarios cases.

Assignment 3 – Cost of Capital – Due April 24 2022

• Compute the cost of equity for your firm (use CAPM; Assume the risk-free rate is 4% and the market risk premium is 5%; obtain the beta from any finance website eg Yahoo Finance)
• Estimate the after-tax cost of debt [ interest rate =$\frac{InterestExpense}{Longterm+shortterm\left(current\right)debt}$ ; tax rate = $\frac{taxexpense}{Earningsbeforetaxes}$ ]
• Compute the weighted average cost of capital using the book value of debt and the market value of equity.

Final Assignment Due: April 28 2022

The final project should be a formal report including references– typed double spaced 12 point font. The final report should include the content of assignments 1&2 and be no more than 7 pages. However, you can use an unlimited number of appendices which will include spreadsheets, graphs etc.

Connect the analysis in Part 1 & 2 together. In Part 1 you would have evaluated the past performance based on profitability, financial leverage and efficiency; in Part 2 you would have projected the required financing to support future growth rates. Based on the projected financing required and past financial performance discuss whether or not you think the firm should proceed with the desired level of growth . In other words, are the results from Part 2 consistent with the evaluation from Part 1.