Rio Tinto Annual Report Assignment Solutions Online

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Answer all the Questions:

1. Using Rio Tinto 2022 Annual Report, calculate the following and provide the detail of calculations: (CLO 3, CLO 7)

Debtors’ Ratio (days) =

Creditors’ Ratio (days) =

Debt / Equity Ratio =

2. Discuss the concept of corporate objectives in the context of agency theory. Take the example of a company to support your discussion. In this case what tools are available to align the interests of shareholders with those of managers. (CLO 4, CLO 6)

3. Jumpjet plc has 6,000,000 ordinary shares in issue and the company has been making regular annual profits after tax of £3,000,000 for some years. The share price is £5.

A proposal has been made to issue 2,000,000 new shares in a rights issue, at an issue price of £4.50 per share.

Calculate the TERP. (CLO 6)

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4. Pool plc is currently planning to buy a new machine which will cost £165,000. It is expected to generate new cash sales of £175,000 per year. The machine will be used for 5 years and at the end of this period it will be scrapped and not replaced. The scrap value of the machine is expected to be £20,000. Initial investment in working capital of £15,000 will also be needed. Annual material and operating costs are estimated to be £105,000 per year.

Pool plc uses a discount rate of 10% in the investment appraisal process. The company has a target Return on Capital Employed (ROCE) of 30% per year, a minimum acceptable PI ratio of 1.6 and a maximum payback period of 2.5 years. Ignore taxation. (CLO 1, CLO 5, CLO 6) Required:

• Payback period;
• Return on Capital Employed (accounting rate of return);
• Net Present Value
• IRR (use 10% and 20%)

5. Explain why bonds are cheaper source of finance than equity. (CLO 5)

 

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