FIN F315 FINANCIAL MANAGEMENT

ASSIGNMENT-1

“Assessing Objective of the company”

EXXON MOBIL CORP. VS CHEVRON CORP.

Industry: OIL

AKHIL MAHAJAN 2017A4PS0820H

KASHISH BULANI 2017ABPS1153H

SHARDUL TAMANE 2017ABPS1332H

SANJANA KHOWAL 2017A4PS1682H

LIKHIT KANODIA 2017ABPS0800H

PARYAN 2017A1PS1106H
 ASSIGNMENT -1

QUANTITATIVE DATA:
CHEVRON:

1. EVA (Economic Value Added) :

(USD $ in millions)

Year 2018 2017 2016 2015 2014

NOPAT 18189 7468 4972 845 20068

COC 10.99% 10.63% 10.33% 10.11% 10.96%

Invested 212825 208093 214697 219665 217074

capital

EVA 5209 14648 27147 23047 3727

2.TSR (Total Shareholders Revenue):

(USD $ in millions)

Year (Date) 2018 (14/08) 2017 (14/08)

Dividend yield 3.93 4.01

Closing stock 122.39 123.18

Opening stock 118.63 124.94

TSR 3.9 4.024

3.SHARE PRICES:

2019: 118.24
2018: 120.4
2017: 113.05
ExxonMobil :

1. EVA (Economic Value Added) :

(USD $ in millions)

Year 2018 2017 2016 2015 2014

NOPAT 19434 14697 8806 9117 25753

COC 9.87 9.62 9.66 9.71 9.97

Invested 292742 291163 280387 279976 278684

capital

EVA 9461 13311 18281 18066 1995

2.TSR (Total Shareholders Revenue):

(USD $ in millions)

Year (Date) 2018(14/08) 2017(14/08)

Dividend yield 5.01% 5.11%

Closing stock 70.49 82.16

Opening stock 68.15 82.01

TSR 4.97 5.108

3.SHARE PRICES:

2019: 68.03
2018: 89.00
2017: 85.51
QUALITATIVE ANALYSIS :

As an investor we expect dividend yield as well as capital gain. TSR or the Total
Shareholder’s Return is an indication of the same. Hence it is used to judge whether the firm
is focussing on the objective of Shareholder Wealth Maximization.

As far as share prices are concerned,it is pretty evident from the past data if the company has
been active in maximizing the share price or not.This kind of decision has the most
constraints and it gets really tough at times to maintain the share hold over the market.
The company can also look after Business Overall Valuation, by focussing on the growth of
Economic Value Added or EVA.If the company has a lot of trouble going with the
aforementioned decisions, then this is their path to choose.This type of decision has the least
constraints and pretty much achievable.The EVA for a company is given by:

The above stated are the objectives of any Business. They can be listed down as follows:.

a) SHAREHOLDER WEALTH MAXIMIZATION

b) SHARE PRICE MAXIMIZATION
c) BUSINESS OVERALL VALUATION
CHEVRON:

● From the data its evident that there has been a decrease in the EVA value as compared
to the last year.Even though there’s an increase in the overall NOPAT, the Capital
Charge has managed to evade the limits and that’s led to a reduced EVA.Even with a
reduced EVA ,the increased NOPAT signifies that the company has been focussing
on achieving an overall increased valuation of business.

● If we take into consideration the factors on inflation and overall growth, the share
prices of the company are pretty much the same. Hence we can say that there hasn’t
been any extra effort from the company to maximize its share price.

● The TSR value at 3.9 and 4.0 is maintained pretty much constant.This implies that
there hasn’t been any substantial effort by the company to increase the wealth of
shareholders. But approximately maintained at 4, the TSR is sufficient to provide
good returns.

CONCLUSION: The organization CHEVRON CORP has been focussing on the 3rd
decision that is the, Business Overall Maximization.
ExxonMobil :

● The data shows a reduced EVA but an increased NOPAT ,with a fairly constant cost
of capital.This may look misleading at first but an increased NOPAT for a company
which is so old and for a market which is so saturated is a fairly good sign.

● The stock prices over the years have been decreasing miserably.The company seems
to have completely neglected the importance of stock prices in the market.The
shareholders will not be satisfied with this price and the corporation needs to put in a
lot of extra effort to at least bring the stock price where it was around 2years back.

● The TSR is maintained constant at around 5 and the return ratio will be quite enough
as compared to the industry average.

CONCLUSION: The company is focussing on maximizing it profit or we can say that, its
adhering to the 3rd decision.It being such an old company its no less than a challenge for it to
not only maintain but also increase its profit year after year.