Aspects of Corporate Governance- Report

Finance Assignment

Table of Contents
Table of Contents.................................................................................................................................2
INTRODUCTION................................................................................................................................4
TASK 1.................................................................................................................................................4
a. Explaining the corporate governance process followed by Rio Tinto.................................4
b. Describing the benefits which are offered by Rio Tinto to community and environment. .4
c. Stating reasons behind increasing debt level in 2012 as compared to2011.........................5
TASK 2.................................................................................................................................................5
a. Calculating cash flows and NPV of the project...................................................................5
b. Assessing the IRR of project...............................................................................................6
c. Suggesting suitable project to Rio-Tinto.............................................................................7
d. Assessing the viability of investment proposal....................................................................7
Computation of NPV and IRR..................................................................................................8
a) Identifying Trump holding period.......................................................................................9
b) Evaluating CAPM model...................................................................................................9
c) Evaluating the impact of policy changes on share price......................................................9
d) Giving suggestion regarding making investment decision................................................10
e) Assessing the share price...................................................................................................10
4. INVESTMENT...............................................................................................................................11
a. Calculating beta for the proposed portfolio.......................................................................11
b. Calculating the required rate of return of the portfolio......................................................11
c. Critically analyzing the extent to which suggestions given by the finance director is
appropriate.............................................................................................................................11
CONCLUSION..................................................................................................................................12
REFERENCES...................................................................................................................................13

INTRODUCTION
In the business organisation, finance is one of the crucial elements which have a high
level of influence on the growth and success of the firm. Thus, it is the accountability of manager
to ensure proper allocation and usage of the fund by taking into consideration the different tools.
This project report is based on Rio Tinto which is one of the largest British-Australian
multinational operating in the mining sector. In this regard, present report will shed light on the
aspects of corporate governance, environment report presented by Rio Tinto. Besides this, it will
also develop an understanding of several financial techniques such as capital budgeting, CAPM
model and construction of the suitable portfolio.
TASK 1
a. Explaining the corporate governance process followed by Rio Tinto
Rio Tinto has organised corporate governance in a highly structured manner. With the
motive to develop and maintain an effective relationship with the stakeholders, Board made
discussion with senior managers regarding the strategy was undertaken. In such discussion,
presentations were given by senior management about the strategic and policy framework of the
company (Rainey and et.al., 2015). Besides this, directors have made a review of financial
aspects on a regular interval with the aim to assess the present in the existing performance level.
Along with this, in 2015, new members of the board visited the mining operations to get
proper knowledge about the company’s activities and staff. In the accounting year 2015, share
prices were decreased significantly which is not a good indicator. However, business unit has
reduced the level of expenses by $3.5 billion to $4.7billion. Such strategy provided assistance to
the firm in enhancing the profit margin (Annual report of Rio Tinto, 2015). This, in turn, helps in
enhancing profit for distributing among the shareholders. This strategy of Rio Tinto clearly
shows alignment in the interest level of management and shareholders.
b. Describing the benefits which are offered by Rio Tinto to community and environment
Rio Tinto has made the major contribution to the growth and development of the
community as well as environment. Out of 100 business unit has attained the rates of 57 in