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1 | P a g e Faculty of Creative Industries and ICT ASSIGNMENT TWO Part A (30 marks) – Theory Research 1st Semester 2022 Subject Name: Financial Management for the Hospitality Industry Subject Code: HM201 Semester/Year 1/2021 Points: 6 Lecturer: David Supangco Assignment Topic(s) Research: The CFO: knowledge, duties and responsibilities. Total Marks 30 Word Count 2000 words Team or Individual Team (maximum of 3 members) Due Date: Week 12 Textbook and journals A minimum of five references. How to submit Only one MS Word document is to be submitted on the link provided for assignment 2 on student web Moodle. Part A: This part is worth 30 marks: Undertake an-in-depth research and discuss the duties, responsibilities and professional knowledge that a contemporary Chief Financial Officer (CFO) will need to succeed in his role. As part of the assignment discuss two major challenges the CFO faces when investing in long term assets and strategies used to curtail the problems. Furthermore, it is critical in the final part of the essay to state the CFO’s fiduciary duties and ethical responsibilities that must be adhered to. Requirement: In this essay, you are required to undertake online research to be able to complete this assignment. Internet websites must be either academic, registered professional associations and or government. 2 | P a g e Faculty of Creative Industries and ICT Assignment 2 Part A (30 marks out of 40 Total marks) GRADING CRITERIA Excellent Good Satisfactory Poor Fail 5% General Description Outstanding or exceptional work in terms of understanding, interpretation and presentation (5 marks) A very high standard of work which demonstrates originality and insight (4 marks) Demonstrates a high level of understanding and presentation and a degree of originality and Insight (3 marks) Satisfies the minimum requirements (2 marks) Fails to satisfy the minimum requirements (0- 1 mark) 5% Reading Strong evidence of independent reading beyond core texts and materials (5 marks) Evidence of reading beyond core texts and materials (4 marks) Thorough understanding of core texts and materials (3 marks) Evidence of having read core texts and materials (2 marks) Very little evidence of having read any of the core texts and materials (0-1 mark) 5% Knowledge of Topic Demonstrates insight, awareness and understanding of deeper and more subtle aspects of the topic. Ability to consider topic in the broader context of the discipline (5 marks) Evidence of an awareness and understanding of deeper and more subtle aspects of the topic (4 marks) Sound knowledge of principles and concepts (3 marks) Knowledge of principles and concepts at least adequate to communicat e intelligently in the topic and to serve as a basis for further study (2 marks) Scant knowledge of principles and concepts (0-1 mark) 5% Articulation of Argument Demonstrates imagination or flair. Demonstrates originality and independent thought (5 marks) Evidence of imagination or flair. Evidence of originality and independent thought (4 marks) Well-reasoned argument based on broad evidence (3 marks) Sound argument based on evidence (2 marks) Very little evidence of ability to construct coherent argument (0-1 mark) 10% Analytical and Evaluative Skills Highly developed analytical and evaluative skills (9-10 marks) Clear evidence of analytical and evaluative Skills (7-8 marks) Evidence of analytical and evaluative skills (5-6 marks) Some evidence of analytical and evaluative skills (3-4 marks) Very little evidence of analytical and evaluative skills (0-2 marks) ASSIGNMENT TWO Part A: This part is worth 30 marks: ASSIGNMENT TWO Part B – Theory Application 1st Semester 2022 Subject Name: Financial Management for the Hospitality Industry Subject Code: HM201 Semester/Year 1/2022 Points: 6 Assignment Topic(s) Part Two (20 Marks) Capital Investment decision, forecasting cashflow and related report. Total Marks 10 Word Count 500 words Team or Individual Team (maximum of 3 members) Due Date: Week 12 Textbook and journals A minimum of five references. How to submit Only one MS Word/Excell document is to be submitted on the link provided for assignment 2b on student web Moodle. Part Two: This part is for the other 10 marks of the assignment: Instructions for Students: It is critical that you will first solve the capital investment question (Q.1) by hand using pen, paper and a calculator. Then copy your answer and findings to the main report in an MS word document. To obtain full marks, the answer needs to be clear and show all workings. For the Forecast question use MS Excel but make sure that your Excel results are copied back on to your main report in MS Word file. Use references from textbooks and journals. 2 | P a g e Q1: Capital Investments Decisions The The Best Hotel Ltd 555 Five Street Melbourne, Vic 3000 Ms Esme Sweet Director of Finance Ms Esme Sweet and her team have to undertake an investment analysis of two projects that will determine the success of the hotel in the next seven years. The project, she and her team must carefully evaluate, analyse and choose a high tech-kitchen that will take the hotel to the next level in low labour costs, fuel efficiency, profitability and competitiveness. Capital Investment Project Project alternative 01 Seed Industrial Kitchens P/L Code B248A Project alternative 02 Plant Industrial Kitchens P/L Capital Investment Project Code C21B6 Projects Alternative 01 Alternative 02 Investment: $3,300,000 $3,900,000 The interest rates these projects are based 0n: 8% per annum (6% cost of capital and 2% company hurdle rate). Projected cash-inflows for both projects after all projected expenses, dividends paid and company tax. Year B248A C21B6 1 $580,652 $680,652 2 $600,645 $700,645 3 $648,000 $748,000 4 $678,000 $798,000 5 $690,000 $820,000 6 $700,000 $901,000 7 $710,000 $919,050 Requirements for Q.1 a) Using the Payback Period method (PBP), in which time period under both alternatives, will Ms J Hue have recovered the initial investment? b) Using the Accounting Rate of Return (ARR) which alternative will have the highest rate of return? c) Using the Net Present Value set at 10% (8% cost of capital and 2% company hurdle rate) would either alternative be a good investment? d) What is the Internal Rate of Return (IRR) for both alternatives? What does the IRR shows us/means? e) What is the Profitability Index (PI)? What does the Profitability measure and why it is an important tool to use? 3 | P a g e f) Having all the data information in front of you and on your desk, as an educated manager/business person which investment would you choose in the final analysis? And why? You will need to thoroughly make a case argument based on the metrics you have undertaken on each investment model highlighting their advantages and disadvantages to present to the Board of Directors. Marks 5 Q2: Forecasting Future Cash Flows for the Zelma Hotel. The Rooms’ Division Manager for a five-star hotel [Zelma Hotel] with 400 rooms has the responsibility of preparing the budget for the next quarter: Prepare an excel spreadsheet model: Month Average Occupancy Rate October-17 86% November-17 85% December-17 95% a) Average room rate: a. October $379 b. November $450 c. December $429 b) Variable cost per occupied room: $37 for October and November and $40 for December. c) Labour cost per room is projected to be 17% of total revenue per month. d) Annual fixed cost is set at: $1,120,000. What is the estimated sales revenue and net revenue after total expenses for the year using the monthly schedule outline? Food and Beverage Department a) Each room on average has two guests. b) On average, it is calculated that 81% for October, 87% for November and 93% for December have breakfast. c) On average breakfast revenue per customer is $30 for each month except December $33. d) The food and beverage cost is set at 17% except for December where it is projected to be 18%. e) The wages cost full time staff is set at is set at 25% of the total revenue [this cost included payroll cost and other related State taxes and insurance.] f) Fixed cost is set to be: