Corporate Financial Management

This report reflects the key understanding on the valuation methods and process to identify the future value at spot. It is analyzed that valuation process of an association relies over the finance related aspects along with the non-financial components of the organization. In this report, Royal Dutch shell has been taken and its financial and non-financial items have been assessed to identify its true value in market. The ratio analysis has shown that company has strong profitability in the market and could easily handle higher financial leverage. Financial performance evaluation is one of the major elements for the investors and by using the financial factors and items from the financial statement and annual report of the business, it helps investors to assess the possible business sustainability and efficiency in market. In case of Royal Dutch shell, below is the capital structure level of the company is also optimum and it could be found that company could easily strengthen its debt funding to strengthen its overall return on capital employed.

Running Head: Corporate Financial Management
1
Project Report: Corporate Financial Management

Corporate Financial Management 2
Executive summary
This report reflects the key understanding on the valuation methods and process to
identify the future value at spot. It is analysed that valuation process of an association relies
over the finance related aspects along with the non-financial components of the organization.
In this report, Royal Dutch shell has been taken and its financial and non-financial items have
been assessed to identify its true value in market. The ratio analysis has shown that company
has strong profitability in the market and could easily handle higher financial leverage.
Financial performance evaluation is one of the major elements for the investors and by using
the financial factors and items from the financial statement and annual report of the business,
it helps investors to assess the possible business sustainability and efficiency in market. In
case of Royal Dutch shell, below is the capital structure level of the company is also optimum
and it could be found that company could easily strengthen its debt funding to strengthen its
overall return on capital employed.

Corporate Financial Management 3
Table of Contents
Executive summary..........................................................................................................2
Table of Contents..............................................................................................................3
Part A:...............................................................................................................................3
Introduction:.................................................................................................................3
Company overview:......................................................................................................3
Corporate governance:..................................................................................................4
Financial performance:.................................................................................................4
Profitability ratio:......................................................................................................5
Asset efficiency ratio:...............................................................................................7
Liquidity ratio:..........................................................................................................9
Capital structure ratio:............................................................................................11
Market structure ratio:............................................................................................13
Risk profile:................................................................................................................16
Optimality of capital structure choices:......................................................................18
Dividend policy:.........................................................................................................22
Prospects and fair valuation:.......................................................................................24
Conclusion/ Recommendation........................................................................................26
Part B:.............................................................................................................................27
Introduction:...................................................................................................................27
Literature review:............................................................................................................27
Application of theory:.....................................................................................................27

Corporate Financial Management 4
Part A:
Introduction:
Valuation process of an association is a procedure wherein different components and
viewpoints are determined by the investigator, administrators and the organization’s
stakeholders to assess the presentation and the situation of the organization. There are
different factors in a corporate that has an effect over the overall performance of the
organization. Essentially, corporate administration of the organization, risk profile, capital
structure, market position, dividend factors, financial analysis and non monetary elements
have an effect over the situation of the organization.
Valuation process of an association relies over the finance related aspects along with
the non financial components of the organization (Reilly and Brown, 2011).
Company overview:
Royal Dutch shell is mainly a British company which has diversified its market into
overseas market. The company is running its business since a long time in oil and gas
industry. The market capitalization of Royal Dutch was highest in the year of 2013 in oil and
gas industry at international level. Home (2019) depicts that around 44000 service station are
owned by the company at international market. Main products consists natural gas,
petroleum, aviation fuel, oil equivalent etc. London stock exchange is the capital market of
Royal Dutch and all the dealing of stock of the company is considered by LSX. The study
explains that crisis in previous years have affected the financial performance at a bad level
but the management and strong policies of the business has helped the organization to
administer the performance again. Current marketing and non financial strategies of the
company is also strong. It helps the organization to improve the overall changes.

Corporate Financial Management 5
Corporate governance:
Corporate governance is a set of various factors, policies, rules and regulations set by
an organization in order to manage the operations and run the activities for the betterment of
the society, environment, employee and other stakeholders of the business. Identification of
corporate governance factors and policies of an organization is one of the important factors
which must be focused by the stakeholders before analyzing the value of an organisation. If
an organization has better and strong corporate governance policies, it directly enhances the
worth of the business in market (Macintosh and Quattrone, 2010). It is essential for an
organization to launch and maintain few programmes for social welfares.
In case of Royal Dutch shell, it has been recognized that company has involved in
various projects for the betterment of social welfare. Royal ditch shell is operating its
business in oil and gas industry which harms the environment as well as the interest of the
employees of the business. In order to reduce the harm level, company has initiated
environment protection policy. Along with that, company has also proposed few policies for
the health care and insurance of employees of the company (Annual report, 2019). Corporate
social responsibility has been administered by Royal Dutch in better way in the market
(Home, 2019).
Financial performance:
Financial performance evaluation is one of the major elements for the investors of an
organization to measure the financial aspects and valuation of an organization. Financial
performance of an organization is evaluated through gathering the financial factors and items
from the financial statement and annual report of the business. It helps the related parties to

Corporate Financial Management 6
identify how much strong the financial plot of the business is and how the company is going
perform in few upcoming years. A better financial position of an organization explains that
the overall worth of the business is improved and the investment into the organization would
offer better return (Kaplan and Atkinson, 2015). In cases of Royal Dutch shell, the ratio
analysis method has been conducted over the company to identify the financial position and
overall performance level of the company. Below is the financial analysis study of the
company:
Profitability ratio:
Profitability ratio is one of the financial ratio analysis method which focuses over the
total earnings of the business. In these ratios, it has been measured that how much profits
have been earn by the company against various financial independent factors likewise sales
level, capital employed, assets, equity etc. Profitability ratios are calculated to measure the
total profit generation capability and financial performance level of the business. In case of
Royal Dutch shell, below is the performance of the company:
Profitability Ratios: 2016 2017 2018
Return on Capital employed 2016 2017 2018
Operating profit / 3,138 3,530 5,766

Corporate Financial Management 7
Capital employed (total assets - current
liabilities)
337,
450
327,
330
321,
381
Answer: % 0.93% 1.08% 1.79%
Return on assets 2016 2017 2018
Net profit / 4,575 12,977 23,352
Total assets
411,
275
407,
097
399,
194
Answer: 1.1% 3.2% 5.8%
Net profit margin % 2016 2017 2018
Net profit / 4,575 12,977 23,352
Sales Revenue % 233,591 305,179 388,379
Answer: 1.96% 4.25% 6.01%

Corporate Financial Management 8
(Morningstar, 2019)
The profitability ratio table explains about increment in the profitability position of
business from 2016 to 2018. Company has managed to improve the ROCE level, ROA level
and net profit margin position in the market. The overall ratio analysis study explains that
overall performance of the company is enough compatible and would offer better returns. The
prediction explains that profitability level of the business would be stronger in near future.
Asset efficiency ratio:
Asset efficiency ratio is one of the financial ratio analysis methods which identifies
the cash conversion cycle of the business. In these ratios, it has been measured that how well
the assets and current operations of the company are managed with how much working
capital. Asset efficiency ratios are calculated to measure the overall daily operation
management capability of the business. In case of Royal Dutch shell, below is the
performance of the company:
Asset Efficiency Ratios 2016 2017 2018
Creditors turnover days 2016 2017 2018
Accounts payable/ 28,069 33,196 30,351
Cost of sales 216,001 276,322 343,504
Answer: (note the above needs to be x # days 47.43 43.85 32.25

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365)
Stock Turnover (days) 2016 2017 2018
Average Inventory / 21,775 25,223 21,117
Cost of Sales # days 216,001 276,322 343,504
Answer: (note the above needs to be x
365) 36.80 33.32 22.44
Debtors Turnover (days) 2016 2017 2018
Average trade debtors / 41,454 45,929 44,269
Sales revenue (note used operating
revenue) # days
233,5
91
305,1
79
388,3
79
Answer: (note the above needs to be x
365) 64.77 54.93 41.60
(Morningstar, 2019)

Corporate Financial Management 10
The assets efficiency ratio table explains about reduction in the cash conversion cycle
of the business. Company has managed to reduce the requirement of working capital in the
organization through reducing the stock turnover rate and debtor turnover days. The overall
ratio analysis study explains that overall performance of the company is enough compatible
and would run the business in lower capital available. The prediction explains that efficiency
level of the business would be stronger in near future.
Liquidity ratio:
Liquidity ratio is one of the working capital ratio analysis method which focuses over
the total short term obligation payment level of the business. In these ratios, it has been
measured that whether company is enough capable to repay all the short term obligation of
the business in estimated time. Liquidity ratios are calculated to measure the total short term
debt obligation and liquidity risk of the business (Phillips and Stawarski, 2016). In case of
Royal Dutch shell, below is the performance of the company:
Liquidity Ratios 2016 2017 2018
Current Ratio 2016 2017 2018
Current Assets / 86,569 95,404 97,482
Current liabilities
73,82
5
79,76
7
77,81
3

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Answer: 1.17 1.20 1.25
Cash ratio 2016 2017 2018
(Cash + marketable
securities) / 19,130 20,312 26,741
Current Liabilities
73,82
5
79,76
7
77,81
3
Answer: 0.26 0.25 0.34
Quick ratio 2016 2017 2018
Current Assets - Inventory / 64,794 70,181 76,365
Current Liabilities
73,82
5
79,76
7
77,81
3
Answer: 0.88 0.88 0.98
(Morningstar, 2019)

Corporate Financial Management 12
The liquidity ratio table explains current liability management of the business. The
calculations express that current ratio, quick ratio and cash ratio of the business is quite better
according to the industry level. Company is enough capable to manage all the liquidity risk
and short term debt obligation. The overall ratio analysis study explains that overall
performance of the company is enough compatible and would offer better base to make an
investment for short term. The prediction explains that efficiency management and short term
debt obligation level of the business would be stronger in near future.
Capital structure ratio:
Capital structure ratio is one of the Capital management and solvency level
identification ratio analysis method which focuses over the risk involved with the capital
structure level and management of cost of capital. In these ratios, it has been measured that
what is the capital structure level of the business and how company is going to manage the
cost of capital. Capital structure ratios are calculated to measure the overall solvency risk and
additional risk held by the company. In case of Royal Dutch shell, below is the performance
of the company:
Capital Structure Ratios 2016 2017 2018
Debt equity ratio 2016 2017 2018
Total liabilities / 224,629 212,741 200,548
Total equity 186,646 194,356 198,646

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Answer: %
1.2
04
1.0
95
1.0
10
Debt ratio 2016 2017 2018
Total debt / 150,804 132,974 122,735
Total assets 411,275 407,097 399,194
Answer: %
0.3
67
0.3
27
0.3
07
Interest Coverage Ratio 2016 2017 2018
EBIT / 3,138 3,530 5,766
Net Finance Costs (used net interest
expense) 2,007 2,826 2,674
Answer: times 1. 1. 2.

Corporate Financial Management 14
p.a 56 25 16
(Morningstar, 2019)
The capital structure ratio table explains about management of solvency position of
business. Study over past 3 years financial data and information explains that capital
management level has been improved. Company has managed to reduce the liabilities level in
the market to reduce the solvency risk and manage the optimal capital structure level. The
overall ratio analysis study explains that still few changes which are required to be manage in
order to improve the position. The prediction explains that capital structure level of the
business would be better in near future (Baker, and Weigand, 2015).
Market structure ratio:
Market structure ratio is one of the financial ratio analysis method which focuses over
the total earnings of shareholders and dividend offered by the company. In these ratios, it has
been measured whether the company is enough compatible at marketplace to manage and
operate the performance. Market structure ratios are calculated to measure the total return
offered to the shareholders along with the better market performance (Horngren et al, 2015).
In case of Royal Dutch shell, below is the performance of the company (Bhullar, Bhatnagar,
and Gupta, 2018).
Market value Ratios 2016 2017 2018

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P/E ratio 2016 2017 2018
Share price / 56.55 58.57 64.91
Earnings per share 1.81 1.82 0.61
Answer:
31.24
3
32.18
1
106.41
0
Earnings per share 2016 2017 2018
Net income 4,575 12,977 23,352
Weighted average shares
outstanding 4,087 4,112 4,141
Answer:
1.81
0
1.82
0
0.61
0
Dividend yield 2016 2017 2018

Corporate Financial Management 16
Annual dividend / 1.53 1.62 1.88
Current stock price 56.55 58.57 64.91
Answer:
0.0
3
0.0
3
0.0
3
Earnings yield 2016 2017 2018
EPS / 1.81 1.82 0.61
Stock price 56.55 58.57 64.91
Answer:
0.0
3
0.0
3
0.0
1
(Morningstar, 2019)
The market value ratio table explains about increment in the returns and market
position of business from 2016 to 2018. Company has managed to improved he market
position through offering better returns and dividend in the market (Bremberger, Cambini,
Gugler, and Rondi, 2016). The overall ratio analysis study explains that overall performance

Corporate Financial Management 17
of the company is enough compatible and would offer better returns. The prediction explains
that market structure level of the business would be stronger in near future (CHANDREN,
AHMAD, and ALI, 2017).
On the basis of ratio analysis over Royal Dutch shell, it has been studied that overall
financial performance level of the company is quite strong and hence, in terms of financial
position, company is a better choice to make investment (Galai, and Wiener, 2015).
Risk profile:
Risk profile is a study where the various financial items are evaluated to measure the
total associated risk with the company. Evaluation over the risk profile of an organization is
important for the stakeholders to make a quick and better decision. Risk profit investment
helps the investors to set better investment asset allocation in order to get better return with
less associated risk. In case of Royal Dutch shell, it has been found that along with the
financial aspects of the business, non financial aspects also affect over the risk profile of the
company (Hansen, Mowen and Guan, 2007). Risk is one of the major aspects to identify the
worth of the business. In order to evaluate the risk profile, various financial risk of the
business has been measured which are as follows (Hail, Tahoun, and Wang, 2014):
Contribution Margin ratio Contribution/ Sales
<=343504/388379
0.88446

Corporate Financial Management 18
Operating leverage effect
Contribution margin ratio /
return on sales
0.00984
Financial leverage effect Operating income / net income
2.27325
Total leverage effect OLE*FLE
0.02237
(Annual report, 2018)
Through the evaluation over annual report, capital market and above study, it has
been recognized that the risk level of the company is enough compatible. Company has
managed to improve the overall level and financial risk of the business. Contribution margin
ratio explains that variable cost of the company is quite lesser in the market. Along with that,
PLE, FLE and CLE level of Royal Dutch has been measured and found that overall risk level
and position has been managed by the company at better level (Hossain, Sheikh,and
Akterujjaman, 2015).

Corporate Financial Management 19
OLE level explains that the risk level of the company is 0.00984 which is quite lesser
and explains about better management of all the operating activities of the business in the
market. Further, financial leverage level’s study evaluated and found that financial risk of the
company is quite higher because of the management of the operating income level against the
net profit of the business. However, the combined risk level of the business is quite lower and
explains that overall performance would be managed by the business efficiently (Islam,
2018).
Optimality of capital structure choices:
Optimal capital structure is the level where all the capital source of the company are
managed and raise in such a way that associated risk with the capital structure of the business
get reduce and cost of capital could also be managed. Optimal capital structure level makes it
easier for the business to reduce the risk and cost of capital level to manage the overall
performance level. In order to evaluate the overall worth if a business, capital structure
evaluation is one of the major analysis methods (Kajola, Adewumi and Oworu,2015).Main
elements of optimal capital structure are debt level and equity level (Garrison, Noreen and
Brewer, 2013). A better optimal capital structure of an organization makes it easier for the
business to improve the performance and manage the overall performance level of the
business. In case of Royal Dutch shell, below is the capital structure level of the company
(Koussis, Martzoukos, and Trigeorgis, 2017).
Market Value Weights
Debt Equity Total
Market value of equity 268,792.31

Corporate Financial Management 20
shares ($M)
Add: Retained Earnings 182,606.00
Value of debt (short term
borrowings+ long term
borrowings) 200,548.00
Total 200,548.00 451,398.31 651,946.31
D. Weights 0.31 0.69
(Yahoo finance, 2019)
The above calculation explains that the total borrowings of the company are just 31%
of total capital of the business. Along with that, the share of market value of equity is 69%. It
expresses that overall borrowings of the company are quite reduced. It further expresses that
the risk level of the company is lower in the company but along with that the cost of capital
of the business is higher. Below are the details of the cost of capital of the company
(Maldajian, and El Khoury, 2014).
B) Cost of Equity and Debt

Corporate Financial Management 21
Cost of Equity: CAPM model
A. Risk free rate 2.38%
B. Market rate of return 8%
C. Beta 0.55
D. CAPM 5.47%
Cost of debt:
Net finance cost ($M)
2,674.0
0
Less: Tax @30%
802.2
0
After tax cost of debt 1,871.8

Corporate Financial Management 22
0
Borrowings amount
200,548.0
0
After tax cost of debt (%) 0.93%
C) Weighted Average Cost of Capital
Debt
Ordinary
Shares Total
Cost of Finance 0.93% 5.47%
Market Weights
0.3
1
0.6
9
WACC 0.29% 3.79% 4.08%
(Annual report, 2018)
The calculation expresses that the changes in capital structure could reduce the
associated risk level of the company along with the better return in the market. Management
has been recommended to buyback few shares and issue the bonds in the market to manage

Corporate Financial Management 23
the capital structure level and make it an optimal capital structure level. The overall position
of the capital structure of Royal Dutch could be improved in near future (Priya,. and
Mohanasundari, 2016).
Dividend policy:
Dividend depicts about the total amount which is paid by the company through its
profit to the equity shareholders of the business. This amount is given against the stock hold
by the shareholders and these are given as return against their investment amount. Investors
always look for the dividend before investing into particular stock (Hansen, Mowen and
Guan, 2017). Financial analyst and investors are always required to identify the total dividend
and dividend yield of the business in order to make an investment decision. In case of royal
ditch shell, dividend payout ratio and dividend yield of the business has been calculated to
measure the dividend policy (Renneboog, and Szilagyi, 2015).
Dividend yield 2016 2017 2018
Annual dividend
/ 1.53 1.62 1.88
Current stock
price 56.55 58.57 64.91
Answer:
0.0
3
0.0
3
0.0
3

Corporate Financial Management 24
Dividend
payout 2016 2017 2018
Annual dividend
/ 1.53 1.62 1.88
EPS 1.81 1.82 0.61
Answer:
0.8
5
0.8
9
3.0
8
On the basis of above calculations, it has been measured that the dividend payout ratio
of the company is quite better and hence, it explains that company is following relevant
dividend payout theory which explains that an organization should offer better return 4to the
shareholders of the company. The main motto of shareholders behind investment in the
capital market is better return. If a good amount of dividend is not offered to the investors of
the business than the interest of investment becomes lesser (Hofstede, 2012).
On the basis of dividend payout ratio and dividend policy of the business, it has been
estimated that the overall dividend performance of the business is quite better and it would
attract more investors to invest in the business for short term as well as long term. Along with
that, less associated risk would also attract the investors to make investment in the company
(Priya, and Mohanasundari, 2016).

Corporate Financial Management 25
Prospects and fair valuation:
Fair valuation over the stocks in one of the financial analyses methods which
evaluates the intrinsic value of the stock through measuring various factors of the business.
Identification over the intrinsic value is one of the major steps to identify whether it is the
right time to make investment in the business or not. In order to identify the fair value of the
stock, dividend discount model has been applied over the company. Dividend discount model
is valuation process which considers the dividend offered by the company and future changes
in the business to identify the fair value of stock of the company. The fair valuation study
helps the company to determine the actual stock price of the company. Below is the fair
valuation study of Royal Dutch shell (Renneboog, and Szilagyi,2015).
Discount Dividend
Model
Forecast Forecast Forecast Forecast Forecast Forecast
2018 2019 2020 2021 2022 2023 2024
1 2 3 4 5 6
Forecast Dividend 1.88 1.9 1.92 1.92 1.95 1.98 2
Forecast Dividend
Growth
1.1% 0.0% 1.6% 1.5% 1.0%
Cost of capital 4.08% 1.0408 1.0833 1.1275 1.1735 1.2213 1.2712

Corporate Financial Management 26
Present Value 1.83 1.77 1.70 1.66
Terminal Value (TV) 77.91
TV discounted to present
value
66.39 77.46
TV of Dividend 6.96
Share price (cents) 73.35 68.70
(Annual report, 2018)
The above table determines that actual stock price of the business should be $ 73.35
on the basis of dividends and other factors of the business. However, the market study
explains that stock price of the business is $ 64.91. It determines that the stock value of the
business is undervalued in the market. Hence, it is the right time for the investors to make
investment for long term or short term in the business. The current investment would offer
better return to the share holders of the business. It further explains that Royal Dutch shell is
better option to make investment.

Corporate Financial Management 27
Conclusion/ Recommendation
To conclude, Royal Dutch shell is performing very well in the market. Company has
few strong policies and management which has helped the company to recover from financial
crisis and after that, company has again established as one of the well known companies in
British territory. The corporate governance study, financial performance, capital structure,
dividend, valuation and risk profile explains that company has managed all the level and
position at better level and hence, it has been found that the company is better choice for the
investment purpose to get higher return for short term as well as long term. To conclude,
investors should invest in the business to improve the overall level. It is analysed that the
corporate social responsibilities and corporate governance policies of the business are enough
strong to maintain a better non-financial position in the industry and in the market. It is
analysed that Company has also followed the proper employee regulations and environment
protection rules so that the harm done by the company because of its operations could be
compensated. Overall, the study over corporate governance of the company explains that the
company has managed all the factors and performance at better level. However, company
needs to strengthen its overall outcomes by aligning its business interest with the
environment and society development.

Corporate Financial Management 28
Part B:
Introduction:
The case explains that Tires Inc is looking towards making a new investment in a
new project, In order to measure whether the investment must be done or not, capital
budgeting study has been conducted on the business. Capital budgeting is a process which
measure the profitability, return, payback period etc of an investment to measure whether the
investment must be done in a particular project or not.
Literature review:
Drury (2013) has explained that capital budgeting is a financial process which
evaluates over the cash inflow, cash outflow, cost of capital, inflation rate etc of a project to
measure whether the project is beneficial or whether the investment should be done in that
project. It is important for the organization to get all the financial and non financial
information if a project before making any decision about the project. Capital budgeting is an
analysis method which identifies the investment proposal and investment position of an
organization. Various methods are there in capital budgeting to evaluate the investment level
in a particular project such as NPV, IRR, payback, discounted payback, profitability index,
accounting rate of return etc. (Drury, 2009). (Davies and Crawford, 2011).
Application of theory:
On the basis of study over case, it has been measured that the overall investment
position of the project is better. Below are the details of cash inflow, return, payback period
and IRR position of the company:

Corporate Financial Management 29
Project A

Corporate Financial Management 30
Year 1 Year 2 Year 3 Year 5
Initial Outlay 200
Revenues from OEM
market
1
20.00 129.84
140
.49
152.0
1
Revenues from
replacement market 40.00 42.43
45
.01
47.7
5
Expenses 40.00 40.00
40
.00
40.0
0
Expenses 30.00 30.00
30
.00
30.0
0
EBDT 50.00 59.84
70
.49
82.0
1
Less: Depreciation 37.50 37.50
37
.50
37.5
0
EBT 12.50 22.34
32
.99
44.5
1
Less: Taxes 13 17.8

Corporate Financial Management 31
5.00 8.94 .20 1
EAT 7.50 13.41
19
.79
26.7
1
ADD: Depreciation 37.50 37.50
37
.50
37.5
0
cash flow 217.41 45.00 50.91
57
.29
64.2
1
Add: Scrap value 50.00
Changes in Working
capital 10
10.0
0
Total cash flow 32.59
74.2
1
Calculation of Net Present Value (Project A)
Years Cash Cash Factors P.V. of Cash P.V. of Cash

Corporate Financial Management 32
Outflow Inflow Inflow Outflow
0 200 1 200
1 70 160 0.91 145.4545455 63.63636364
2 70 172.27 0.83 142.38 57.85
3 70 185.50 0.75 139.37 52.59
4 70 199.76 0.68 136.44 47.81
563.64 421.89
NPV= Total Cash Inflow-Total cash outflow 141.7504053
Calculation Of IRR
Years Cash Cash Net cash

Corporate Financial Management 33
Outflow Inflow inflows
0 200 -200
1 70 160.00 90
2 70 172.27 102
3 70 185.50 116
4 70 199.76 130
IRR 38%
Calculation Of Payback period
Years Cash Cash Cash flows CF

Corporate Financial Management 34
Outflow Inflow
0 200 -200 -200
1 70 172.27 102.27 -97.73
2 70 185.50 115.50 17.78
3 70 199.76 129.76 147.54
4 70 0.00 -70.00 77.54
1.85
The above table explains that cash inflow of the company is higher than the cash
outflow of the investment proposal which is a good sign and explains that the investment
must be done in the investment proposal. Further, NPV level of the project explains that NPV
of the project is $ 141.75 which is better and depicts that investment must be done in the
project to get better return. Further, the IRR level of project has been studied and found that
the internal rate of return from the project would be 38% which is quite higher than the cost
of capital of the business (Sarwar, Xiao, Husnain, and Naheed, 2018).

Corporate Financial Management 35
Conclusion/ recommendation
On the basis of overall study over cash inflow, total return, IRR and payback period, it has
been estimated that the overall position of the investment proposal is enough strong and
investment into the project would offer higher return to the business. However, in terms of In
case of Royal Dutch shell, it has been recognized that company has involved in various
projects for the betterment of social welfare. Royal ditch shell is operating its business in oil
and gas industry which harms the environment as well as the interest of the employees of the
business. Nonetheless, after making the capital budgeting evaluation in the case given, it is
found that Tires Inc is recommended to make an investment in the project to get better return.
Lastly, the payback period explains that the total invested amount in the project would be
getting back by organization in 1.85 years whereas the life of the project is 4 years. It
explains that in the lesser time, amount would be getting back. Capital budgeting not only
evaluates the total return from the project but it also considers the total time period and the %
where the NPV level of the business would be zero to make better decision. Capital
budgeting study makes it easier for the business to identify the best project from various
available projects. It is important for the organization that it should consider non-financial
factors as well to make decision about investment in the company. It is advised that in order
to measure the valuation process in a better manner, Royal Dutch shell constrained has been
investigated and their related variables have been estimated to ascertain the absolute
estimation of the organization. It is found that predominantly, the valuation of the association
is studied by the financial specialists of the organization to figure that how the association is
dealing with its responsibilities, perspectives, aspects and the chance to get better position. It
should be based on the financial and non-financial factors of the organization. Further, this
process is likewise conducted by the organization of the organization to assess that what are

Corporate Financial Management 36
the main alterations must be done in the techniques spot and the exhibition of the
organization to make the presentation of the organization better

Corporate Financial Management 37
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Appendix:
Refer to the attached spreadsheet