The CEO of Everest Ltd. stated the following in the companys 2020 annual report: Everest continues to make good use of shareholders funds through new investments. Shareholders faith in the company was rewarded by improved performance as indicated by an increase in return on common equity. In response to the managing directors comments, you set about analysing the growth of the company and produce the following table: 2020 2019 Return on common equity (ROCE) 15.47% 14.89% Return on net operating assets (RNOA) 12.86% 13.87% Net borrowing cost (NBC) 3.50% 3.00% Sales ($ millions) 530 430 Operating income after tax ($ millions) 153 129 Average net operating assets ($ millions) 1,190 930 Average net financial obligations ($ millions) 260 80 Average common shareholders' equity ($ millions) 930 850

Required: (a) Decompose the change in ROCE into components due to financing activities and operating activities. (3 marks)

(b) Decompose the change in RNOA into components due to profit margin and asset turnover. (4 marks)

(c) Decompose the change in common shareholders equity into components due to sales growth, the change in net assets required to support sales, and changes in borrowing. (4 marks)

(d) On the basis of your preceding analysis and without further calculation, critically evaluate the performance of the company and managements comments. (6 marks) (e) On the basis of your preceding analysis, does Everest appear to have a sustainable competitive advantage? Why or why not? (3 marks)