Discuss how successful RioTinto (ASX: RIO) has been at delivering value to its shareholders over the past 5 years.

State your assumptions clearly and make use of appendices.
focus on the finance, not strategy or marketing
1. Complete an EVA analysis of RioTinto for the last 5 years.
Clearly show your work rather than using final EVA numbers from another source.
2. Analyse the Total Shareholder Return (TSR) of the company for the past 5 years,
including any key events and compare with a similar company (BHP (ASX:BHP))
3. Undertake a current valuation of the equity in this company, using the following methods:
a. Net Asset Value.
Comparable Ratios (e.g. P/E, P/B, EV/EBITDA).
Look at both past results and comparable firms (BHP) to analyse and justify an appropriate valuation.
Note that simply multiplying the current ratio by the recent earnings (or book value or EBITDA) is not sufficient.
b. Discounted Free Cash Flow.
Forecast each component of free cash flow (e.g. Sales, costs, capex, etc.) for at least 5 years of forecast cash flows and estimate a terminal value, and then discount them back at the appropriate cost of capital which were estimated. Make sure to justify all of assumptions.
You need to find information to support your forecasts from sources including the MD&A section of the company’s annual report (or its competitors), news stories, industry trade publications and government or think tank studies on the industry.
c. Reconcile any differences in value that were obtained using these different methods.
d. State (with reasons) what value you think is correct for the company.
clearly explain all of your assumptions used in the valuations.
The report should include:
– a key point summary of your conclusions
– graphical illustration, where appropriate
– a bibliography of sources of information used and references to texts or other material drawn upon.
– detailed tables, extracts or copies of financial information should be placed in the appendices if they are necessary to understand your report.
only include appendices if you refer to them in the body of the report.