F301 Financial Management

FINAL EXAM FORMULA SHEET

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PV

FV = PV(1+r)t

APV = C *

FV
(1 r ) t

1 PVIF
] =
r

C*

1
(1 r ) t
]
r

Perpetuity PV at perpetuitys Time Zero = PMT1/r =

First cash flow

r

E.A.R.

quotedrate
no.of periodsper year
1
1
1 1 periodic rate
m

APR as decimal
1
1
m

APR = R m
Stock Price Formulas:
General:
P0 =

D1
D2
D3
D4
D5

..........
2
3
4
(1 r ) (1 r )
(1 r )
(1 r )
(1 r ) 5

Zero Dividend Growth:

P0 = D/r

Constant Dividend Growth:

P0 =

D0 (1 g )
D1
Next Dividend

(r g )
(r g )
(r g )

Pt =

Dt (1 g )
Dt 1

;
(r g )
(r g )

r=

D1
g
P0

Non-constant Dividend Growth:

P0 =

D1
D2
Dt
Pt

..........

2
t
(1 r ) (1 r )
(1 r )
(1 r ) t

Inflation - Fisher Effect:

)

F301 Final Exam Formula Sheet

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F301 Formula Sheet

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EBIT = Sales Costs Depreciation
OCF = EBIT taxes on EBIT + depreciation
Or
OCF = [(Sales -Cost)*(1-T)] + (Depreciation * tax rate)

Capital investment
terminal cash flow

=
=

Selling price minus tax on gain

Selling price [(selling price book value) * tax rate]

CFA = OCF increase in NWC net capital spending

NPV = CF0 + CF1/(1+r) + CF2/(1+r)2 + + CFT/(1+r)T
Internal Rate of Return: 0 = NPV when IRR is the discount rate

Arithmetic mean =

Sum of terms
n

))

CAPM: E(RE) = Rf + E [E(RM ) Rf ] or, in a slightly oversimplified form: RE = Rf + (RM Rf)

WACC = (E/V) * RE + (D/V)*RD*(1-TC) + (P/V)*Rp
= (weight of equity cost of equity) + (weight of debt cost of debt (1 T))
+ (weight of preferred stock cost of preferred stock)
MACRS depreciation tables:
Year
1
2
3
4
5
6
7
8

3-year
33.33%
44.44%
14.82%
7.41%

F301 Final Exam Formula Sheet

5-year
20%
32%
19.2%
11.52%
11.52%
5.76%

7-year
14.29%
24.49%
17.49%
12.49%
8.93%
8.93%
8.93%
4.45%

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