Final Examination, Spring 2022

Financial Management Formula Sheet

 NPV = PVinflows – PVoutflows  Capital Asset Pricing Model
 PI = PVinflows / PVoutflows 𝐤 𝐢 = 𝐤 𝐑𝐅 + (𝐤 𝐌 − 𝐤 𝐑𝐅 )(𝛃𝐢 )
 WACC = 𝐖𝐝 𝐤 𝐝𝐚𝐭 + 𝐖𝐩𝐬 𝐤 𝐩𝐬 + 𝐖𝐒 𝐤 𝐬  Yield till Maturity
𝐏𝐚𝐫−𝐕
 Return on Assets (ROA) 𝑰 + ( 𝐧 𝐁)
𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 YTM = [__________________]
𝐗 𝟏𝟎𝟎 𝐏𝐚𝐫+𝐕𝐁
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
 Return on Equity (ROE) 𝟐
𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭  Coefficient of Variation
𝐗 𝟏𝟎𝟎 𝛅
𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬 ′ 𝐄𝐪𝐮𝐢𝐭𝐲 𝐂𝐕 =
 Debt Ratio
𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭𝐬  Beta
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬 𝛅𝐢
 𝛃𝐢 = 𝐫
Debt to Equity Ratio 𝛅𝐌 𝐢𝐌
𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭𝐬 𝛃𝐩 = 𝐰𝟏 𝛃𝟏 + 𝐰𝟐 𝛃𝟐 +. . . + 𝐰𝐧 𝛃𝐧
𝐓𝐨𝐭𝐚𝐥 𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲 𝐧
 Equity Ratio
𝐓𝐨𝐭𝐚𝐥 𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲 ∑ 𝐰𝐢 𝛃𝐢
𝐢=𝟏
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
 Dividend Per Share  Value of Bond
= Dividend / No. of outstanding shares 𝟏 − (𝟏 + 𝐤 𝐝 )−𝐧
𝐈[ ] + 𝐏(𝟏 + 𝐤 𝐝 )−𝐧
 Payout ratio = Dividend / Net Profit 𝐤𝐝
 Value of Perpetual Bond
 Earnings Per Share (EPS) 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭
= Net Profit / No. of outstanding shares 𝐕𝐁 =
𝐤𝐝
 Price Earnings Ratio (P/E)  Current Yield:
= Market Value per share / EPS 𝐀𝐧𝐧𝐮𝐚𝐥 𝐘𝐢𝐞𝐥𝐝
𝐂𝐘 = 𝐗 𝟏𝟎𝟎
𝐕𝐁
 Operating Cash Flows  Capital Gain Yield:
∆CFAT = (∆S - ∆C - ∆D) (1-T) + ∆D 𝐂𝐆𝐘 = 𝐘𝐓𝐌 − 𝐂𝐘
 Rate of Return 𝐏𝟏 − 𝐏𝟎
𝐀𝐦𝐨𝐮𝐧𝐭 𝐑𝐞𝐜𝐞𝐢𝐯𝐞𝐝 − 𝐀𝐦𝐨𝐮𝐧𝐭 𝐈𝐧𝐯𝐞𝐬𝐭𝐞𝐝 𝐂𝐆𝐘 = 𝐗 𝟏𝟎𝟎
= 𝐏𝟎
𝐀𝐦𝐨𝐮𝐧𝐠 𝐈𝐧𝐯𝐞𝐬𝐭𝐞𝐝  Value of Common Stock
 𝐃 (𝟏 + 𝐠) 𝐃𝟏
Expected Rate of Return 𝐕𝐬 = 𝐏̂𝟎 = 𝟎 =
𝐤𝐬 − 𝐠 𝐤𝐬 − 𝐠
= 𝐏𝟏 𝐤 𝟏 + 𝐏𝟐 𝐤 𝟐 +. . . + 𝐏𝐧 𝐤 𝐧 𝐃
𝐧 𝐕𝐬 = 𝐏̂𝟎 =
𝐤𝐬
∑ 𝐏𝐢 𝐤 𝐢
 Value or Cost of Preferred Stock:
𝐢=𝟏
𝐃𝐩𝐬
𝐕𝐩𝐬 =
p = 𝐰𝟏 𝟏 + 𝐰𝟐 𝟐 +. . . + 𝐰𝐧 𝐧
𝐤 𝐩𝐬
𝐧
𝐃𝐩𝐬
∑ 𝐰𝐢 𝐢 𝐤 𝐩𝐬 =
𝐢=𝟏 𝐏𝟎 − 𝐅
 Gordon Growth Model  Dividend Yield:
𝐃𝟏 𝐃𝟏
𝐤𝐬 = +𝐠 𝐃𝐘 = 𝐗 𝟏𝟎𝟎
𝐏𝟎 𝐏𝟎
 Cost of debt before tax = Krf + Spread
𝐃𝟏  Cost of debt after tax = Kd (1 – tax)
𝐤𝐬 = +𝐠
𝐏𝟎 − 𝐅  Initial Outlay = DCF + IDCF

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