XYZl PLC operates branches in city a, city b and city c. city a was the companys first, opened in 1999. city b Branch opened in 2005, andcity c opened in 2007. xyx has previously evaluated branches based on return on investment (ROI) and then residual income (RI). Carol Mays, the xyz Group manager is concerned that the focus on annual ROI could have an adverse long-run effect on the branches and the group's performance, in particular, it might cause managers to ignore emerging threats and opportunities. However, the company is considering changing to an economic value added (EVA) approach. All branches are assumed to face similar risks. Data for 2019 follow:

	city a	city b	city c	Total
Revenues	$4,100,000	$4,380,000	$3,230,000	$11,710,000
Variable costs	1,600,000	1,630,000	955,000	4,185,000
Fixed costs	1,280,000	1,560,000	980,000	3,820,000
Operating income	1,220,000	1,190,000	1,295,000	3,705,000
Interest costs on long-term debt at 8%	368,000	416,000	440,000	1,224,000
Income before taxes at 35%	852,000	774,000	855,000	2,481,000
Net income	553,800	503,100	555,750	1,612,650
Net book value at 2019 year-end:
Current assets	1,280,000	850,000	600,000	2,730,000
Long-term assets	4,875,000	5,462,000	6,835,000	17,172,000
Total assets	6,155,000	6,312,000	7,435,000	19,902,000
Current liabilities	330,000	265,000	84,000	679,000
Long-term debt	4,600,000	5,200,000	5,500,000	15,300,000
Stockholders equity	1,225,000	847,000	1,815,000	3,923,000
Total liabilities and stockholders equity	6,155,000	6,312,000	7,435,000	19,902,000
Market value of debt	4,750,000	5,350,000	5,800,000	15,900,000
Market value of equity	2,500,000	2,750,000	2,650,000	7,900,000
Cost of equity capital				13%
Required rate of return				12%
Accumulated depreciation on long-term assets	2,200,000	1,510,000	220,000

1. Use the DuPont method of profitability analysis to evaluate the performance of the three hotel branches for the year 2019. Use 2019 total assets as the investment base. Show your calculations and comment on the results.
2. Comment on the potential strengths and weaknesses of using the DuPont method of profitability for measuring branch performance at Coral Group. What factors affecting ROI does the DuPont method of profitability analysis highlights?
3. Calculate residual income (RI) for each of the hotel branches using operating income as a measure of income and total assets minus current liabilities as the measure of investment.
4. david alex, the city c branch manager, argues that city b and a branches have loaded up on lot of short-term debt to boost their RI. Calculate an alternative RI for city a branch only that is not sensitive to the amount of short-term debt taken on by the branch. Comment on the results.
5. Refer back to the original data. Calculate the WACC for xyzs branches