BU603 formula sheet PDF

Preview

Summary

Formula Sheet...

Description

BU603

Formula Sheet

Chapters 5 & 6 Simple interest: FV  PV 1  it Perpetuity: PV 



Compound interest: FV  PV 1  r

C r

Perpetuity due: PV  m



t

C 1  r  r

n

  r  j Equivalent rates:  1     1   m n    

1  1 t  1  r  Ordinary annuity: PVA  C   r   

Annuity due: PVAdue

   and FVA  C   

 1  r t  1    r    

 1 1  t   1 r    and FVA  P 1  r  C 1  r    due r    

C Growing Perpetuity: PV  r g

  1  r t  1    r      1  g t  1      1  r  

C Growing Annuity: PV  r g

Chapters 7, 8, 13 and 14

 1   1  r N d Annual coupon bond: PB  $C   rd   coupon $  YTM approximation: YTM 

 F  where $C = F x c  1  r N d 

face value - price  # coupon payments to maturity face value  price  2

1 year return on equity: return 

Div 1 P1  P0  P0 P0

Value of no growth stock: PE  P0 

Div 0 eps

Dividend Payout ratio: r  average return 

Div 1 rE

1

T

T

returnt  t

Preferred shares: P ps 

Value of constant growth rate stock: PE  P 0  Price/earnings ratio P/E  ˆ 2  variance of returns 

1

ˆ  standard deviation of returns  ˆ 2 Geometric Average Return =  1 r1    1 r 2  

Div ps r ps

P0 eps

1 T  returnt  r T 1 t 1

CV  coefficient of variation= ˆ



rT  

1

T

1

Div 1 rE  g

r



2

BU603

Formula Sheet

Cov  E ,M   Calculation of beta: E   E  Corr E ,M     M2 M   Security market line SML : r E  r RF  E r M  r RF  P

Portfolio return: rp   w j r j where j 1

P

wi  j

1

Portfolio betas:  p 

1

p

w j j  j 1

WACC formula: rWACC = rd (1-TC)wdebt + rpswps + rEwequity Weights are wequity =E/V, wdebt=D/V and wps=PS/V. Chapter 9 Payback:



CFt  t

NPV: NPV 

 CF0

1

0

N

CFt

t0

1  IRR 

IRR: 0  

N

 t

CFt

1  r 

t

Profitability Index: P I =

t

N

 t 1

CFt

1  r 

t

CF 0

Chapter 10 and 11 Undepreciated capital cost: UCCn = UCC0(1-0.5d)(1-d)n-1 Expansion project:

NPV  EE 0  PV OCF  PV CCA TS  EE 0 

n



OCF j 1 - Tc 

 1 r 

j 1

j

forever

 PV Salvage - PVCCA TS

 I  d  TC   r d

 1  0.5r     1 r

lost

 PVNWC

  S  d T C   1  NWC n S NWC 0    n   n  n   r d (1 ) r   1 r      1 r 

Replacement project:

NPV

 EE 0  PV OCF  PV CCA TS   EE 0 

n

 j

1

 NWC 0 

OCF j 1 -T c 

1

r

j

forever

 PV Salvage - PV CCA TS

 I d T C  1  0.5r     r d   1 r

NWC n

1  r 

n

1  1  r  n   Equivalent annual annuity NPV n  An  r    

lost

 PV NWC

 S d T C   1   S   n n    1  r   r  d   (1  r ) ...