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Information Table

Last Sales 56576


Sales Growth 2% (56576/54264)^(1/2)-1 Compound Annual Growth Rate (CAG
Op. Profit Margin 39% (19694/10194)^(1/2)-1
Tax Rate 30% Australia Main Corporation Tax Rate November 2010
Inc. Cap. Investment 69%
Inc. W. Cap 32%
Planning Horizon 5 Years
Required Rate of Return 8.70%
Mkt Securities and Cash 11122 Assets: Other Financial Assets + other financial assets + cash and cas
Risk Free 2.48% Bank of England 5 year yield curve rate 28 February 2011
Rm - Rf 5.60% Based on surveys by Fernandez
Beta 1.16
Total Equity 202757 8 Feb 11 NYSE 76.63 price per share
volume 2645921
Book Value of Debt 13277
Total Mve + Mvd 216034
As Percentage
Equity 94%
Debt 6%
Kd cost of debt 6.37% Average of Interest Rate on Finance leases

Sensitivity Analysis
What if book value of debtIncrease
increases/decreases
byDecrease
25% by
by 25%
25% What if Beta increase/decrease by 25%
Last Sales 56576 56576 Last Sales 56576
Sales Growth 2% 2% Sales Growth 2%
Op. Profit Margin 39% 39% Op. Profit Margin 39%
Tax Rate 30% 30% Tax Rate 30%
Inc. Cap. Investment 69% 69% Inc. Cap. Investment 69%
Inc. W. Cap 32% 32% Inc. W. Cap 32%
Planning Horizon 5 Years 5 Years Planning Horizon 5 Years
Required Rate of Return 8.70% 8.70% Required Rate of Return 10.22%
Mkt Securities and Cash 11122 11122 Mkt Securities and Cash 11122
Risk Free 2.48% 2.48% Risk Free 2.48%
Rm - Rf 5.60% 5.60% Rm - Rf 5.60%
Beta 1.16 1.16 Beta 1.45
Total Equity 202757 202757 Total Equity 202757
Book Value of Debt 16596.25 11285.45 Book Value of Debt 13277
Total Mve + Mvd 219353.25 214042.45 Total Mve + Mvd 216034
As Percentage As Percentage
Equity 92% 95% Equity 94%
Debt 8% 5% Debt 6%
Kd cost of debt 6.37% 6.37% Kd cost of debt 6.37%
ound Annual Growth Rate (CAGR) = (ending amount/ beginning amount) ^ (1/N-1) -1

financial assets + cash and cash equivalents - other financial liabilities - other financial liabilites
8 February 2011

ecrease by 25%
56576 Weighted Average Cost of Capital
2% Ke*E/(E+D)+Kd*(1-t)*D/(E+D)
39%
30%
69% Beta Increase byDecrease
25% by 25%
32% WACC 10.22% 7.78%
5 Years Book value Increase
of debt byDecrease
25% by 25%
7.78% WACC 8.63% 8.74%
11122
2.48%
5.60%
0.99
202757
13277
216034

94%
6%
6.37%
Net Asset Valuation
Year 2010 2009 2008 2007 2006
Net Asset 65274 45925 22461 26324 19385
No. Ordinary Shares 1960.6 1570.7 1570.1 1293 1349.6
Share Price 33.29 29.24 14.31 20.36 14.36

Formula: Market Value of Net Assets / No. of ordinary shares

Year 2010 2009 2008 2007 2006


Dividend Per Share 0.9 0.56 1.24 1.17 1.91 Obtained from annual report Notes to

Formula:Dividends paid during the year/ (Rio Tinto plc previous year Final and Special (b) + Rio Tinto Limite

Dividend Valuation Model


P=D1/(ke-g)
3.19

Growth
-0.19
Growth from 2008/10

CAPM
Ke= Rf+βe(Rm-Rf)
8.98%

Sensitivity Analysis
Beta
Increases by 25% Decreases by 25%
Ke= Rf+βe(Rm-Rf) Ke= Rf+βe(Rm-Rf)
10.60% 8%
om annual report Notes to dividend

cial (b) + Rio Tinto Limited previous year Final and Special)
Weighted Average Cost of Capital
Ke*E/(E+D)+Kd*(1-t)*D/(E+D)
8.70%

Price-Earnings Ratio - P/E Ratio


Formula: Market value per share / Earnings per share

Year 2010
Market Value Per Share 76.63
EPS 7.74
P/E Ratio 9.89

Year 2010 2009 2008 2007 2006


Net operating profit after tax 15184 5335 4609 7746 7867
Number of shares 1960.6 1570.7 1570.1 1293 1349.6 Obtained from Annual Report Div
EPS 7.74 3.40 2.94 5.99 5.83
Economic Value Added In Progress
1.Calculate Net Operating Profit After Tax 15184
2.Calculate Total Invested Capital 89780
3.Determine a Cost of Capital (WACC) 8.70%
4.Calculate EVA = NOPAT - WACC% * TC 7375

Economic Profit
Profit before interest after tax - (Invested capital * WACC)

Obtained from Annual Report Dividend Notes


n Progress
SVA Calculation
Year 1 2 3 4 5 6+
Sales 57769 58987 60230 61500 62796 62796
Profit 22526 23001 23486 23981 24486 24486
Less Tax 6758 6900 7046 7194 7346 7346
Less ICI 824 841 859 877 896 0
Less IWC 381 389 397 405 414 0

Operating Cash 14564


Flow 14871 15184 15504 15831 17141
PV of cash flow 13415 12618 11868 11163 10499 129863
NPV 189425.98
Add Mkt secs 11122
Less Debt 13277

Equity 187271

Actual 202757 92%


2010 2009 2008 2007 2006
Sales Revenue 56576 41825 54264 29700 22465
Operating Profit 19694 7506 10194 8571 8974
Change in Revenue 14751 -12439

Mkt Securities and Cash


Balance Sheet Extract
Non-current assets
Other financial assets 1334
Current assets
Other financial assets 521
Cash and cash equivalents 9948
Subtract
Non-current liabilities
Other financial liabilities 416
Current liabilities
Other financial liabilities 265
Mkt Securities and Cash 11122

ICI
Balance Sheet Extract 2010 2009 2008
Property, Plant and Equipment 56024 45803 41753
Intangible Asset 5700 5730 6285
Total 61724 51533 48038
Change 10191 3495

ICI 2010
0.69

IWC
Balance Sheet Extract 2010 2009 2008
Trade and other receivables 7407 5822 6512
Inventories 4756 4889 5607
Subtract (Non current assets + current assets)
Trade and other payables 7455 6350 7649
Total 4708 4361 4470
Divide by change in sales 14751 -12439 (Non current assets + current assets)
IWC 0.32

Formula for ICI


gible Asset 2010 - PPE+Intangible Asset 2009 / Change in Sales
Formula for IWC
(Trade and other receivables+stock-trade and other payable 2010) - (Trade and other receivables+stock - trade and

Sources:
Rio Tinto Annual Report 2010 http://www.riotinto.com/annualreport2010/performance/five_year_review.htm
Rio Tinto Annual Report 2009 http://www.riotinto.com/annualreport2009/financial_statements/index.html
All About EVA http://www.investopedia.com/articles/fundamental/03/031203.asp
Total Invested Capital
Non-Current Assets Non-Current liabities
Goodwill 15296 Trade and other payables
Intangible assets 5700 Other financial liabilities
Property, plant and equipment 56024 Provision for post retirement benefits
Investments in equity accounted units 6503 Other provisions
Loans to equity accounted units 227
Inventories 375
Trade and other receivables 1826
Deferred tax assets 1863
Tax recoverable 89
Other financial assets 1334

Current Assets Current Liabilities


Inventories 4756 Trade and other payables
Trade and other receivables 5582 Other financial liabilities
Loans to equity accounted units 110 Provision
Tax recoverable 542 Bank overdrafts repayable on demand
Other financial assets 521
Cash and cash equivalents 9948
Assets of disposal groups held for sale 1706
Total Assets 112402
Total Invested Capital 89780

urrent assets)

urrent assets)

vables+stock - trade and other payables 2009)/change in sales

ce/five_year_review.html
_statements/index.html
031203.asp
879
416
4339
9023

6576
265
1117
7