CORPFIN 1002 Business Finance – FORMULA SHEET

Present Value Fisher Equation

𝐶𝐶 (1 + 𝑟𝑟𝑛𝑛 ) = (1 + 𝑟𝑟𝑟𝑟 ) x (1 + π)
𝑃𝑃𝑃𝑃 =
(1 + 𝑟𝑟)𝑛𝑛

Return
1
1− 𝐷𝐷1 + 𝑃𝑃1 − 𝑃𝑃0
(1 + 𝑟𝑟)𝑛𝑛 % Return =
𝑃𝑃𝑃𝑃 = 𝐶𝐶 x � � 𝑃𝑃0
𝑟𝑟

Risk
𝐶𝐶
𝑃𝑃𝑃𝑃 =
𝑟𝑟 ∑(𝑅𝑅 − 𝑅𝑅� )2
Standard deviation = 𝜎𝜎 = �𝜎𝜎 2 = �
𝑛𝑛 − 1
𝐶𝐶
𝑃𝑃𝑃𝑃 =
(𝑟𝑟 − 𝑔𝑔)
𝜎𝜎 = �� Prb. x (𝑅𝑅 − 𝑅𝑅� )2

1 1 + 𝑔𝑔 𝑁𝑁
𝑃𝑃𝑃𝑃 = 𝐶𝐶 x �1 − � � �
𝑟𝑟 − 𝑔𝑔 1 + 𝑟𝑟
𝜎𝜎 = �𝑤𝑤12 𝜎𝜎12 + 𝑤𝑤22 𝜎𝜎22 + 2𝑤𝑤1 𝑤𝑤2 𝜌𝜌1,2 𝜎𝜎1 𝜎𝜎2

Future Value
Capital Asset Pricing Model (CAPM)
𝐹𝐹𝐹𝐹 = 𝐶𝐶 x (1 + 𝑟𝑟)𝑛𝑛
𝐸𝐸(𝑅𝑅𝑒𝑒 ) = 𝑟𝑟𝑓𝑓 + 𝛽𝛽𝑒𝑒 𝑥𝑥�𝐸𝐸(𝑅𝑅𝑚𝑚 ) − 𝑟𝑟𝑓𝑓 �

(1 + 𝑟𝑟)𝑛𝑛 − 1
𝐹𝐹𝐹𝐹 = 𝐶𝐶 x � �
𝑟𝑟 Capital Budgeting
𝑛𝑛
𝐶𝐶𝐶𝐶𝑡𝑡
Number of periods 𝑁𝑁𝑁𝑁𝑁𝑁0 = � − 𝐶𝐶𝐶𝐶0
(1 + 𝑘𝑘)𝑡𝑡
𝑡𝑡=1
𝐶𝐶
log � �
(𝐶𝐶 − 𝑃𝑃𝑃𝑃 𝑥𝑥 𝑟𝑟)
𝑛𝑛 =
log(1 + 𝑟𝑟) (1 + 𝑘𝑘)𝑛𝑛
𝑁𝑁𝑁𝑁𝑁𝑁∞ = 𝑁𝑁𝑁𝑁𝑁𝑁0
(1 + 𝑘𝑘)𝑛𝑛 − 1

𝐹𝐹𝐹𝐹
𝑙𝑙𝑙𝑙 �𝑃𝑃𝑃𝑃 �
𝑛𝑛 = 𝑁𝑁𝑁𝑁𝑁𝑁0
𝑙𝑙𝑙𝑙(1 + 𝑟𝑟) 𝐸𝐸𝐸𝐸𝐸𝐸 =
1
1−
(1 + 𝑘𝑘)𝑛𝑛
� 𝑘𝑘 �
Effective Annual Rate

𝐴𝐴𝐴𝐴𝐴𝐴 𝑚𝑚
1 + 𝐸𝐸𝐸𝐸𝐸𝐸 = ��1 + � �
𝑚𝑚 Weighted Average Cost of Capital (WACC)
𝐷𝐷 𝐸𝐸
𝑘𝑘𝑎𝑎 = (1 − 𝑡𝑡𝑐𝑐 )𝑘𝑘𝑑𝑑 � � + 𝑘𝑘𝑒𝑒 � �
𝐷𝐷 + 𝐸𝐸 𝐷𝐷 + 𝐸𝐸