Faculty of Business
Repeat Assignment Title Sheet
Course and Stage: International Hospitality Management – Stage 3
Lecturer
Subject: International Financial Management
Study Mode: Full time x Part-time
Assignment No.: REPEAT
Assignment Titles: Flavour and Turmoil
Word count: See details below Weighting 1. 30%
2. 10%
Due date:
Submit assignment to: Two copies of assignment must be presented at the time of submission. Late submissions will incur a late penalty.
Learning Outcomes addressed and assessed in these Assignments:
1. Flavour
Understand the cash flows relating to a detailed project.
Be able to identify the cash flows relevant to the decision-making process.
Demonstrate an understanding of two evaluation techniques (Net Present Value & Payback Period).
Write a report to management, outlining recommendations and reasons supporting it.
2. Finance
Identify difficulties encountered by the hospitality industry due to the recent turmoil in the markets.
Draft a report for management with recommendations on how to overcome the difficulties.
Assignment Brief:
Assignment 1 – Flavour (30%)
Flavour is a major firm which operates a number of contracts, providing catering services in staff restaurants at many large companies. It has built up a reputation for supplying high quality and service at a reasonable price.
A large multinational company has recently approached Flavour to supply catering services to staff at its Dublin site. The main details of the contract are:
1. The initial contract will be for a period of four years.
2. At the commencement of the contract Flavour will have to acquire new kitchen equipment at a cost of €650,000. Installation costs will amount to €100,000. The equipment is expected to have scrap value of €100,000 at the end of the contract and Flavour will depreciate the initial cost in its accounts over four years, on a straight-line basis.
3. Existing equipment will also be transferred from another project. This equipment is surplus to requirements and has no further use to Flavour. It was recently acquired in error by Flavour for €80,000 when the specifications for the project were overstated.
4. The multinational company has 800 staff employed at its site and experience indicates that 85% of staff use the catering facilities. Each staff member spends an average of €40 per week in the restaurant. The restaurant will open for 50 working weeks of the year.
5. Based on experience of other sites food costs account for 40% of sales value and general labour costs (food preparation, serving and cleaning) account for 25% of sales value. These percentages are not expected to change over the life of the contract.
6. To maintain a quality service Flavour estimates that a manager and two supervisors must be assigned permanently to the contract. The average salary and on-costs total €40,000 for a manager and €30,000 for a supervisor. It is expected that salary costs will increase by 10% in year three.
7. Flavour will have to arrange additional insurance cover, costing €70,000 per annum.
8. Heating, lighting and energy costs amount to €60,000 per annum. The multinational company will assume responsibility for 40% of these costs.
9. All administration functions for the site will be provided by Flavour’s Head Office staff in their spare time.
10. Flavour has a cost of capital of 10% per annum. For projects to be acceptable they must have a Payback Period of less than three years and provide a positive NPV, when discounted at Flavour’s cost of capital.
Required
1. Detail the relevant cash flows of the new contract (40 marks)
2. Calculate the Payback Period of the contract (20 marks)
3. Calculate the Net Present Value of the contract (20 marks)
4. Draft a brief report to the management of Flavour, summarising your findings and detailing your recommendation on the acceptability of the contract. (20 marks)
Total 100 marks
Assignment 2 (10%)
The recent turmoil in global financial markets has caused difficulties for companies generally. The hospitality industry has suffered particularly, due to the discretionary nature of its revenue.
Required
Write a report which
(i) Identifies the difficulties which, you feel, have impacted on the industry and
(ii) makes recommendations on the means to overcome these difficulties.
(Maximum 500 words)
