CFA Level 2 Formulas AND Notes - Equity PDF

Preview

Summary

Download CFA Level 2 Formulas AND Notes - Equity PDF

Description

BLUME METHOD OF BETA REGRESSION ANALYSIS P/E VALUATION ADJ BETA =(2/3 * B) + (1/3 * 1) TO ADJ FOR BETA DRIFT PVGO = EXCESS STOCK PRICE OVER THE (E1/r) PRICE H-MODEL - DECLINING GROWTH RATE IN LINEAR FASHION OVER t YEARS

JUSTIFIED FORWARD P/E (LEVEL 1) = PAYOUT RATIO / (R-g) JUSTIFIED TRAILING P/E (NEW) = (PAYOUT RATIO * (1+g)) / (r-g)

V0= ((D0*(1+gL)/(r-gL)+((D0*H*(gS - gL)/(r-g))) WHERE H = (t/2) = Half life of high growth period t = high growth time in years gS = short term growth rate (high) gL = long term growth rate (low) r = required return

PEG = (P/E)/g g in whole number ra

DISCOUNT FCFF BY (WACC - g)

FCFF

JUSTIFIED P/B =(ROE-g)/(r-g)

FROM NET INCOME = NI + DEP +(INT * (1-tax)) - FCInv - WCInv FROM EBIT = (EBIT * (1-tax)) + DEP - FCINV - WCINV

JUSTIFIED P/S =Net profit margin *

FROM EBITDA =(EBITDA * (1-TAX)) + (DEP * (1-TAX)) - FCINV - WCINV FROM CFO =CFO + (INT *(1-TAX)) - FCINV WHERE FCINV = NET INV IN FIXED CAPITAL (CAPEX)

RESIDUAL INCOME RI = NET INCOME - EQUITY CHA WHERE EQUITY CHARGE = EQUITY CAP (EARNINGS IN CURRENT YEAR)

WCINV = NET INV IN WORKING CAPITAL (EXCLUDING CASH)

(CURRENT YEAR ROE - COST OF DISCOUNT FCFE BY (Re - g)

FCFE FROM FCFF =FCFF - (INT * (1-TAX)) + NET BORROWING FROM NI =NI + DEP -FCINV - WCINV + NET BORROWING FROM CFO =CFO - FCINV + NET BORROWING W/ TARGET DEBT RATIO NI - ((1-DR)*(FCINV-DEP)) - ((1-DR) * WCINV)) DR = CONSTANT DEBT RATIO

VALUE = TODAY BOOK VALUE + (SUM OF A where Re = required return on equity

Stock XYZ

Net Income Dividend per share Required Rate of Return Growth Rate BV of Equity Sales

JUSTIFIED FORWARD P/E JUSTIFIED TRAILING P/E

8.00 8.56

ather than percentage PEG

1.222857143

JUSTIFIED P/B

3.22222

JUSTIFIED TRAILING P/E JUSTIFIED P/S CHECK #

ARGE = E(t) - (r * BV (t-1)) = (ROE -r)(BV (t-1) ITAL * COST OF EQUITY - (COST OF EQUITY * LAST YEARS BV OF EQUITY)

2.14 2.14

$ 25.00 $ 6.00 10% 7% $ 150.00 $ 100.00

F EQUITY) (LAST YEARS BV OF EQUITY)

ALL DISCOUNTED RI's)...