Your task for this part of the case is to conduct a comprehensive financial analysis of Royal Caribbean Cruises and to compare their performance with Carnival Cruises. Excerpts from Royal Caribbean's and Carnival's 2010 10-K filings are included as online exhibits in the Royal Caribbean 2010 folder at http://www.lundholmandsloan.com/new%20cases.html. You will need to import the case data into eVal. (Note: find the files RCL 2010 Data.xls and CCL 2010 Data.xls at http://www.lundholmandsloan.com/new%20cases.html. Copy the yellow block of data for the company, and then paste this block of data into the yellow cells at the bottom of the Financial Statements sheet using Paste Special - Values from the Edit menu.) You should compare the financial statements in eVal with the ones in the 10-K filings so that you can see exactly what data are used to compute each ratio and make any necessary adjustments. The definitions of each ratio are given in the textbook. 1. Compare the size and growth rates of Royal Caribbean and Carnival Cruises. What are the advantages to being large in this industry? 2. Compute the 2010 net operating income, net financing expense, average net operating assets, and average net financial obligations from the financial statements in Royal Caribbean's 10-K filing. 3. Using your answers to the previous question, compute return on equity (ROE) and then decompose ROE using the advanced Dupont decomposition: ROE = RNOA + Leverage Spread How does your decomposition compare to the one provided by eVal? 4. Using the financial ratios provided by eVal, evaluate any trends in Royal Caribbean's return on equity, compare it with Carnival Cruise's return on equity, and discuss the main causes of any differences. 5. Now consider each of the main drivers of return on equity: margins, turnovers, and leverage. Using eVal's output as a starting point, evaluate any trends and compare Royal Caribbean with Carnival Cruises in each of these areas. Only note what is exceptional do not discuss every possible ratio. 6. Does a dollar of revenue increase bring about a constant increase in expenses for Royal Caribbean, or do they enjoy economies of scale? Estimate any economies of scale that might be present. 7. Suppose that 35 percent of Carnival Cruise's passengers also book their air travel through the cruise company (as an "air and sea" package) while only 25 percent of Royal Caribbean's passengers include the air portion in their booking. Conceptually, how will this affect your ratio comparison of the two companies and discuss how you might adjust the data to remove this distortion?