4. Analyse the firm's current operation using its financial statements (i.e. income statement, balance sheet and cash-flow statement). You should also take into account supply and demand factors (i.e. you need to look at the market conditions at both industry and economy levels)?

5. Download the S&P/ASX 200 from Yahoo Finance website and calculate the rate of return for S&P/ASX 200?

Average Market Return

Using CAPM

Risk free %0.72%

Rio beta1.101.10

Average S&P/ASX 200 market Return7.01%Point 52.88%(without adjustments for regular cash dividends)

6. Using the Capital Asset Pricing Model and an appropriate government bond yield as risk-free interest rate and the result from to calculate the required rate of return for RIO?

Rate of Return = (Dividend Payment/Stock) + Dividend Growth Rate

7.65% = 5.66/95.45 + Dividend Growth Rate

Dividend Growth Rate = 1.72%

7. Use an appropriate dividend valuation model to value RIO's shares (Hint: use the total dividend figures)?

Dividend (2020) = $5.66

RIO share price = 5.66 (1+1.72%)/(7.65% - 1.72%) = $97

8. (Part 2) Compare the company's share price and return with your analyses in questions (6) and (7) above?

Rate of Return (RRR)(CAPM) : 7.65% (from answer 6)

Rate of Return (RRR) (actual) : 11.53% (refer below calculation)

Share price (CAPM) : $97 (from answer 7)

Share price (actual) : $101 (refer below calculation)

Current share price at $95.45 which is undervalued compared with calculated actual share price, $101

Therefore, can buy more share

Annual Capital Gain = Rio adj. share price 2020/ Rio adj. share price 2010

Annual Capital Gain = (95.45/55.53)1/10

Annual Capital Gain = 5.6%

Dividend Yield = Dividend in 2020/Current Share Price

Dividend Yield = 5.66/95.45

Dividend Yield = 5.93%

Total Return on the stock (RRR) = 5.6% + 5.93% = 11.53%

Rate of Return = (Dividend Payment/Stock Price) + Dividend Growth Rate

11.53% = 5.93% + Dividend Growth Rate

Dividend Growth Rate = 5.6%

Share price = 5.66 (1+5.6%)/(11.53% - 5.6%) = $101

9. Use the information and results from your analyses in questions 4-8 above; identify areas of cash flows (i.e. operating, investing and financing) where the firm needs to pay attention to?

10. Suggest relevant investment and financing strategies to improve the firm's cash flow position?

11. Justify your recommendation in terms of shareholders' wealth maximization?

Based on the above analysis from question 4 to 8, please provide recommendations and analysis of the firm with details of where to focus? The details should cover all the areas specified from question 9 to 11 ?

Thank you and Appreciate your detailed analysis!!