BAFI 1008 BUSINESS FINANCE

FORMULAE SHEET


1. ( ) 1
n
r PV FV + = FUTURE VALUE OF A SINGLE SUM

2.
( ) 1
n -
r FV PV + =

PRESENT VALUE OF A SINGLE SUM

3.
( )
(

+
=
r
r
PMT FV
n
1 1
FUTURE VALUE OF AN OR ANNUITY

4.
( )
(

+
=

r
r
PMT PV
n
1 1
PRESENT VALUE OF AN OR ANNUITY

5.
r
PMT
PV = PRESENT VALUE OF PERPETUITY


6. 1 1
|

\
|
+ =
m
e
m
NIR
i EFFECTIVE RATE OF INTEREST


7.
( )
(
(

+
=

d
n
d
r
r
PMT Bondprice
1 1
( )
n
d
r
FV
+
+
1
VALUE OF DEBT (Bond)


8.
e
r
d
P
1
0
= - CONSTANT DIVIDENDS MODEL

9.
( )

1
0
0
g r
g d
P
e

+
= g r for
g r
d
e
e
>

=
1
- CONSTANT GROWTH IN DIVIDENDS MODEL

10.
0
1
P
d
DIVY = DIVIDEND YIELD

11.
0
0 1
P
P P
CGY

= CAPITAL GAINS YIELD

12. ARR =
. .
. .
value book Average
profit net Average
ACCOUNTING RATE OF RETURN

13.
( )
0
1 1
CF
r
CF
NPV
n
t
t
t

+
=

=
NET PRESENT VALUE


14. ( ) ( )( ) h r R + + = + 1 1 1 FISHER'S THEOREM


15.

=
=
n
t
t t i
R R
1
Pr INDIVIDUAL ASSET
- EXPECTED RETURN

16. ( )

=
=
n
t
t
i
t i
R R
1
2
Pr - STANDARD DEVIATION (IE. RISK)

17. ( ) ) (
i f m f i
R R R R E + = SECURITY MARKET LINE EQUATION [CAPM]

18. =
B A
COV
,

, B A B A
- COVARIANCE

19.
m
m i m i
m
m i
2
,
2
,
cov

= = - BETA

20 n
n
B
B
A
A p
R w R w R w R E ..... ) ( + = - PORTFOLIO EXPECTED RETURN


21.
B A B B A A p
w w w w 2
2 2 2 2 2
+ + =
, B A B A
- PORTFOLIO VARIANCE (2 ASSET)


22.
p
=

w
1

1 +
w
2

2
+ w
3

3 +...........
w
n

n - PORTFOLIO BETA


23. ( )
m
p
f m f p
R R R R E

+ = ) ( CAPITAL MARKET LINE EQUATION

24.
) (
. . Re
i
f i
R R E
risk to ward

= REWARD TO RISK RATIO

25. ( )
V
D
r
V
E
r WACC
c d e
+ = 1 WEIGHTED AVERAGE COST OF CAPITAL


26.
0
P
d
R
pref
pref
= COST OF PREFERENCE SHARES

27. ( ) ) (
i f m f i
R R R R E + = COST OF ORDINARY SHARES