365 CFA® Level 1

Formula Sheet
Part I

www.365careers.com
Contents

Contents 2

Ethics 3

Quantitative Methods 5

Economics 14

Corporate Finance 19

Alternative Investments 25
Ethical and
Professional
Standards

01
 Ethical and Professional
Standards
I. Professionalism
I(A) Knowledge of the Law.
I(B) Independence and Objectivity.
I(C) Misrepresentation.
I(D) Misconduct.

II. Integrity of Capital Markets

II(A) Material Non-public Information.
II(B) Market Manipulation.

III. Duties to Clients

III(A) Loyalty, Prudence, and Care.
III(B) Fair Dealing.
III(C) Suitability.
III(D) Performance Presentation.
III(E) Preservation of Confidentiality.

IV. Duties to Employers

IV(A) Loyalty.
IV(B) Additional Compensation Arrangements.
IV(C) Responsibilities of Supervisors.

V. Investment Analysis, Recommendations, and Actions

V(A) Diligence and Reasonable Basis.
V(B) Communication with Clients and Prospective Clients.
V(C) Record Retention.

VI. Conflicts of Interest

VI(A) Disclosure of Conflicts.
VI(B) Priority of Transactions.
VI(C) Referral Fees.

VII. Responsibilities as a CFA Institute Member or CFA Candidate

VII(A) Conduct as Participants in CFA Institute Programs.
VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program.
Quantitative
Methods

02
 Quantitative Methods

TIME VALUE OF MONEY

( )
m
Effective Annual Rate Stated annual rate
Effective annual rate = 1 + -1
(EAR) m

FVN = PV x (1 + r)N r = Interest rate per period

Single Cash Flow PV = Present value of the investment
FVN FVN = Future value of the investment
(Simplified formula) PV = (1 + r)N
N periods from today

mN

Investments paying interest

( )rs
FVN = PV x 1 + m
rs = Stated annual interest rate
m = Number of compounding
FVN periods per year
more than once a year PV =

( )
mN N = Number of years
rs
1+
m

Future Value (FV) of an

Investment with Continuous FVN = PVersN
Compounding

Ordinary Annuity
FVN = A x
[(1 + r)N - 1
r ] N = Number of time periods
A = Annuity amount

[ ]
1- 1 r = Interest rate per period
(1 + r)N
PV = A x r

FV ADue = FV AOrdinary x (1 + r) = A x
[
(1 + r)N - 1
r ]
x (1 + r)

[ ]
1- 1
Annuity Due
(1 + r)N
PV ADue = FV AOrdinary x (1 + r) = A x x (1 + r)
r

A = Annuity amount
r = The interest rate per period
corresponding to the frequency
of annuity paments (for example,
annual, quarterly, or monthly)
N = Number of annuity payments
 Quantitative Methods

TIME VALUE OF MONEY

Present Value (PV) of A

PVPerpetuity = A = Annuity amount
a Perpetuity r

Future value (FV) of a series FVN = Cash flow1(1 + r)1 + Cash flow2(1 + r)2 … Cash flowN(1 + r)N
of unequal cash flows

N CFt = Expected net cash flow at time t

Σ CFt N = Investment’s projected life

Net Present Value (NPV) NPV =
(1 + r)t r = Discount rate or opportunity
t=0 cost of capital

CF1 CF2 CFN

Internal Rate of Return NPV = CF0 + + (1 + IRR)2 + ... + (1 + IRR)N = 0
(IRR) (1 + IRR) 1

Holding Period Return (HPR) Ending value - Beginning value

No cash flows HPR =
Beginning value

Holding Period Return Ending Beginning Cash flow

(HPR) value - value + received P1 - P0 + D1
HPR = =
Cash flows occur at the end of Beginning value Beginning value
the period
P1 = Ending Value
P0 = Beginning Value
D = Cash flow/dividend received
rBD = Annualized yield on a bank
discount basis
D = Dollar discount, which is equal to the
Yield on a Bank Discount D 360 difference between the face value of
Basis (BDY) rBD = X the bill (F) and its purchase price (P0)
F t
F = Face value of the T-bill
t = Actual number of days remaining
to maturity

360 t = Time until maturity

Effective annual yield (EAY) EAY = (1 + HPR) t -1 HPR = Holding Period Return

Money market yield

(CD equivalent yield)
Money market yield = HPR x
( )360
t
=
360 × rBankDiscount
360 - (t x rBankDiscount)
 Quantitative Methods

STATISTICAL CONCEPTS AND MARKET RETURNS

Range = Largest observation number

Range
Interval Width Interval Width = - Smallest Observation or number
k k = Number of desired intervals

Relative Frequency Interval frequency

Relative frequency =
Formula Observations in data set

Σ
N
N = Number of observations in the
xi
Population Mean entire population
i = 1 ... n
x1 + x2 + x3 + ... + xN Xi = the ith observation
μ= =
N N

Sample Mean
x=
Σ
i = 1 ... n
xi

=
x1 + x2 + x3 + ... + xn
n n

n
Geometric Mean G= √ x1x x 2 3 ... xn n = Number of observations

n
xn =

Σ( )
n
Harmonic Mean 1
xi
i = 1 ... n

Median for odd

numbers Median =
{ }
(n + 1)
2

Median of even
Median =
{ }
(n + 2)
2
numbers
n
Median = 2
 Quantitative Methods

STATISTICAL CONCEPTS AND MARKET RETURNS

Σ
n
w = Weights
Weighted Mean xw = wixi X = Observations
i = 1 ... n
Sum of all weights = 1

w = Weights
Portfolio Rate of Return rp = wara + wbrb + wcrc + ... + wnrn
r = Returns

y = The percentage point at which we

{ }
Position of the Observation are dividing the distribution
y
Ly = (n + 1) 100 Ly = The location (L) of the percentile
at a Given Percentile y
(Py) in the array sorted in
ascending order

Range Range = Maximum value - Minimum value

Σ
n
X = The sample mean
Mean Absolute Deviation |xi - x |
n = Number of observations in
MAD =
i = 1 ... n
the sample
n

Population Variance
σ2 =
Σ
i = 1 ... n
(xi - μ)2 μ = Population mean
N = Size of the population
N

√ Σ
N
Population Standard (xi - μ)2 μ = Population mean
Deviation N = Size of the population
σ= i = 1 ... n
N

Σ
n
X = Sample mean
Sample Variance (xi - x )2
n = Number of observations in
i=1
s2 = the sample
n-1
 Quantitative Methods

STATISTICAL CONCEPTS AND MARKET RETURNS

Σ
n
Sample Standard X = Sample mean
(xi - x )2 n = Number of observations in
Deviation i=1 the sample
s= n-1

Σ
n
n = Total number of observations
1 (Mean - rt)2
Semi-Variance Semi-variance = n below the mean
rt = Observed value
rt < Mean

Percentage of observations 1
Chebyshev Inequality k = Number of standard
within k standard deviations > 1 - 2
k deviations from the mean
of the arithmetic mean

s s = Sample standard deviation

Coefficient of Variation CV =
x x = Sample mean

Rp = Mean return to the portfolio

Rp - Rf RF = Mean return to a risk-free asset
Sharpe Ratio Sharpe Ratio =
σp σp = Standard deviation of return
on the portfolio

Σ (xi - x )3 n = Number of observations in

Skewness
sk =
[ n
(n - 1)(n - 2) ] x
i = 1 ... n

s3
the sample
s = Sample standard deviation

[ Σ(x - x )
]
4
i
Kurtosis n (n + 1) 3 (n - 1)2
KE = x i = 1 ... n
-
(n - 1)(n - 2)(n - 3) S4 (n - 2)(n - 3)

n = Sample size
s = Sample standard deviation
 Quantitative Methods

PROBABILITY CONCEPTS
P(E) E = Odds for event
Odds FOR E Odds FOR E = P(E) = Probability of event
1 - P(E)

P(A B)
U
Conditional Probability P(A|B) = where P(B) ≠ 0
P(B)

Additive Law P(A U B) = P(A) + P(B) - P(A

U
B)
(The Addition Rule)

The Multiplication Rule P(A

U
B) = P(A|B) x P(B)
(Joint Probability)

P(A) = P(A|S1) x P(S1) + P(A|S2) x S1, S2, …, Sn are mutually exclusive

The Total Probability Rule x P(S2) + ... + P(A|Sn) x P(Sn) and exhaustive scenarios or events

P(n) = Probability of an variable

Expected Value E(X) = P(A)XA + P(B)XB + ... + P(n)Xn Xn = Value of the variable
x = Value of x
(x - x)(y - y) X = Mean of x values
Covariance COVxy = y = Value of y
n-1
y = Means of y
n = Total number of values
covxy σx = Standard Deviation of x
Correlation ρ= σσ σy = Standard Deviation of y
x y COVxy = Covariance of x and y
n
Variance of a Random
Variable σ2X = ∑(x - E(x))
i = 1 ... n
2
x P(x)
The sum is taken over all values of
x for which p(x) > 0

w = Constant
Portfolio Expected Return E(RP) = E(w1r1 + w2r2 + w3r3 + … + wnrn) r = Random variable

Var(RP) = E[(Rp - E(Rp)2 ] = [w12 σ12 + w22σ22 +

Portfolio Variance + w32σ32 + 2w1w2Cov(R1R2) + Rp = Return on Portfolio
+ 2w2w3Cov(R2R3) + 2w1w3Cov(R1R3)]

P(B|A) x P(A)
Bayes’ Formula P(A|B) =
P(B)

The Combination Formula nCr = () n n!

c = (n - r)! r!
n = Total objects
r = Selected objects

n!
The Permutation Formula nPr =
(n - r)!
 Quantitative Methods
COMMON PROBABILITY DISTRIBUTIONS
The Binomial Probability
Formula
Binomial Random
Variable
For a Random Normal
Variable X
Safety-First Ratio
Continuously Compounded
Rate of Return
SAMPLING AND ESTIMATION
Sampling Error of the
Mean
Standard Error of the
Sample Mean
(Known Population Variance)
Standard Error of the
Sample Mean
(Unknown Population Variance)
Z-score
Confidence Interval for
Population Mean with z
Confidence Interval for
Population Mean with t
z or t-statistic?
n = Number of trials
n! x = Up moves
P(x) = px x (1 - p)n - x px = Probability of up moves
(n - x)! x! (1 - p)n - x = Probability of
down moves
E(X) = np n = Number of trials
Variance = np(1 - p) p = Probability
90% confidence interval for X is x - 1.65s; x + 1.65s s = Standard error
95% confidence interval for X is x - 1.96s; x + 1.96s 1.65 = Reliability factor
x = Point estimate
99% confidence interval for X is x - 2.58s; x + 2.58s
RP = Portfolio Return
SFRatio =
[E(Rp) - RL
σp ] RL = Threshold level
σp = Standard Deviation
i = Interest rate
t = Time
FV = PV x e ixt
ln e = 1
e = Тhe exponential function,
equal to 2.71828
Sample Mean - Population Mean
σ n = Number of samples
SE =
√n σ = Standard deviation
S s = Standard deviation in
SE = unknown population’s
√n sample
x = Observed value
x-μ
Z= σ = Standard deviation
σ μ = Population mean
Zα/2 = Reliability factor
σ σ x = Mean of sample
x - Zα x ; x + Zα x σ = Standard deviation
2 √n 2 √n n = Number of trials/size of
the sample
s s tα/2 = Reliability factor
x - tα x ; x + tα x n = Size of the sample
2 √n 2 √n s = Standard deviation
Z known population, standard deviation σ, no matter the sample size
t unknown population, standard deviation s, and sample size below 30
Z unknown population, standard deviation s, and sample size above 30
 Quantitative Methods

HYPOTHESIS TESTING
tn - 1= t-statistic with n − 1 degrees of
freedom (n is the sample size)
Test Statistics: X-μ X-μ
x = Sample mean
Population Mean
zα = σ ; tn-1, α = s μ = Hypothesized value of the
√n √n population mean
s = Sample standard deviation

(x1 - x2) - (μ1 - μ2)

t-statistic =
sp2 sp2 12
Test Statistics: Difference in
Means - Sample Variances ( n1 + n2 ) Number of degrees of freedom =
= n1 + n2 − 2
Assumed Equal
(Independent samples) (n1 - 1)s12 + (n2 - 1)s22
sp2 =
n1 + n2 - 2

(x1 - x2) - (μ1 - μ2)

t-statistic =
s12 s22 12
Test Statistics: Difference in
Means - Sample Variances
( n1 + n2 ) S = Standard deviation of
respective sample
Assumed Unequal n = Total number of observations
( )
2
s12 s2
(Independent samples) + n2 in the respective population
degrees of n1 2
=
freedom s12
( ) +( )
2 s22 2
n1 n2
n1 n2

Test Statistics: Difference in degrees of freedom = n - 1

Σ
n
Means - Paired Comparisons d - μd0 1 di n = Number of paired observations
t= , where d = n d = Sample mean difference
Test Sd i = 1 ... n
(Dependent samples) Sd = Standard error of d

degrees of freedom = n - 1
Test Statistics: Variance (n - 1)s2
X
2
= s2 = Sample variance
Chi-square Test n-1
σ 0
2
σ02 = Hypothesized variance

Test Statistics: Variance s12 degrees of freedom = n1 - 1 and n2 - 1

F= , where s12 > s22 s12 = Larger sample variance
F-Test s22
s22 = Smaller sample variance
Economics

03
 Economics

TOPICS IN DEMAND AND SUPPLY ANALYSIS

0 > e > -1 Inelastic demand

%∆ Quantity demanded (Qx) -1 > e > -∞ Elastic demand
Price Elasticity = e = -1 Unit elastic demand
%∆ Price (Px) e=0 Perfectly inelastic demand
e = -∞ Perfectly elastic demand

%∆ Quantity demanded (Qx) e>0 Normal goods

Income Elasticity = e<0 Inferior goods
%∆ Income (Ix)
εY = Income elasticity

e>0 The related product is a substitute

Cross-price %∆ Quantity demanded (Qx) e<0 The related product is a complement
Elasticity = %∆ Price of a related good (Py)
y = Related product
εpy = Cross-price elasticity

THE FIRM AND MARKET STRUCTURES

MC = Marginal cost
For all market structures, Max Profit when MC = MR
MR = Marginal revenue

ATC = Average Total Cost

AR = Average Revenue
AR = ATC (perfect competition)
Breakeven points TR = Total Revenue
TR = TC (imperfect competition) TC = Total Cost
AR = ATC holds true in imperfect
competition
Short-run AR < AVC (perfect competition)
shutdown points TR < TVC (imperfect competition)
Market structures:
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
 Economics

AGGREGATE OUTPUT, PRICES, AND ECONOMIC GROWTH

Total GDP = Final value of goods and services produced (market value)
+ Government services (at cost)
+ Rental value of owner-occupied housing (an estimate)

Nominal GDP
GDP Deflator = x 100
Real GDP

t = Current year
Nominal GDPt = Pt x Qt b = Base year
Pt = Prices in year t
Real GDPt = Pb x Qt Pb = Prices in base year
Qt = Quantity produced in year t

Expenditure Approach

Real GDP = Consumption spending (C) + Investment (I) X = Exports

+ Government spending (G) + Net exports (X-M) M = Imports

Income Approach

Real GDP = National income + Capital consumption allowance + Statistical discrepancy

Real GDP = Consumption spending (C) + Savings (S) + Taxes (T)

Savings (S) = Investments (I) + Fiscal Balance (G-T) + Trade Balance (X-M)
S – I = Fiscal Balance (G-T) + Trade Balance (X-M)

National Income = Employees’ compensation

+ Corporate and government profits before taxes
+ Interest income
+ Unincorporated business net income (business owners’ incomes)
+ Rent
+ Indirect business taxes
− Subsidies

Personal Income = National income

+ Transfer payments (social insurance, unemployment or disability payments)
− Indirect business taxes
− Corporate income taxes
− Undistributed corporate profits
 Economics

AGGREGATE OUTPUT, PRICES, AND ECONOMIC GROWTH

Personal Disposable Income = Personal income - Personal taxes

Potential GDP = Aggregate hours worked x Labor productivity

Aggregate hours worked = Labor force x Average hours worked per week
Growth in Potential GDP = Growth in labor force + Growth in labor productivity

Y = Aggregate output
The Production Function Y = A x f (K, L) A = Total Factor Productivity (TFP)
K = Capital
L = Labor

Growth in Potential GDP = Growth in technology + WL x (growth in labor) + WC x (growth in capital)

WL = Labor’s percentage share of
national income
WC = Capital’s percentage share of
national income

UNDERSTANDING BUSINESS CYCLES

Number of unemployed people
Unemployment Rate =
Total labor force

Total labor force

Participation Rate (Activity Ratio) =
Total working-age population

Labor Force = Unemployed people + Employed people Unemployed = Looking for job

Cost of basket at current-year prices

Consumer Price Index = x 100
Cost of basket at base-year prices

∑ (Current-year price x Base-year quantity)

Laspeyres’ Index =
∑ (Base-year price x Base-year quantity)

Fisher’s Index = √(Laspeyres’ Index) x (Paasche Price Index)

Σ (Current-year price x Current-year quantity)

Paasche Price Index =
Σ (Base-year price x Base-year quantity)
 Economics

MONETARY AND FISCAL POLICY

1
Money Multiplier =
Reserve requirement

MPC = Marginal propensity

1
Fiscal Multiplier = to consume
1 - MPC x (1 - t) t = Tax rate

Equation of Exchange MV = PY (Money supply x Velocity = Price x Real output)

Fisher Effect Nominal Interest Rate = Real interest rate + Expected inflation rate

Neutral interest rate = Real trend rate of economic growth

Neutral Interest Rate
+ Inflation target

INTERNATIONAL TRADE AND CAPITAL FLOWS

C = Consumption
I = Investments
GDP GDP = C + I + G + X - M G = Government Spending
X = Export
M = Import

Balance of Payments Current Account + Capital Account + Financial Account = 0

X - M = Private Savings
Trade Balance + Government Savings
- Investments in domestic capital

CURRENCY EXCHANGE RATES

CPI base currency

Real Exchange Rate = Nominal exchange rate x
CPI price currency
Corporate
Finance

04
 Corporate Finance

CAPITAL BUDGETING

Σ
N
CFt
CFt = After-tax cash flow at time t
Net present value (NPV) NPV = (1 + r)t r = Required rate of return for the investment
t=0

Σ
N
Internal Rate of Return CFt
=0
(IRR) (1 + IRR)t
t=0

Average Accounting Rate of Average net income

AAR =
Return (AAR) Average book value

PV of future cash flows NPV

Profitability Index (PI) PI = =1+
Initial Investment Initial Investment
 Corporate Finance

COST OF CAPITAL
wd = Proportion of debt that the
company uses when it raises new funds
rd = Before-tax marginal cost of debt
t = Company’s marginal tax rate
Weighted Average Cost wp = Proportion of preferred stock the
WACC = wdrd (1 - t) + wprp + were
of Capital (WACC) company uses when it raises new funds
rp = Marginal cost of preferred stock
we = Proportion of equity that the company
uses when it raises new funds
re = Marginal cost of equity

Tax shield Tax shield = Deduction × Tax rate

Dp Pp = Current preferred stock price per share

Cost of Preferred
rp = Dp = Preferred stock dividend per share
Stock Pp rP = Cost of preferred stock

P0 = Current market value of the equity

market index
Cost of Equity D1 D1 = Dividends expected next period on
(Dividend discount model re = +g the index
approach) P0
re = Required rate of return on the market
g = Expected growth rate of dividends

(D/EPS) = Assumed stable dividend

Growth Rate
( )
g= 1-
D
EPS
x ROE payout ratio
ROE = Historical return on equity

Cost of Equity Risk premium = Additional yield on a

(Bond yield plus risk premium) re = rd + Risk Premium company’s stock relative to its bonds

βi = Return sensitivity of stock i

to changes in the market return
Capital Asset Pricing
E (Ri) = RF + βi [E (RM) - RF ] E(RM) = Expected return on the market
Model (CAPM)
E(RM) − RF = Expected market risk premium
RF = Risk-free rate of interest

Rm = Average expected rate of return on

the market
Cov (Ri, RM)
Beta of a Stock βi = Ri = Expected return on an asset i
Var (RM) Cov = Covariance
Var = Variance
 Corporate Finance

COST OF CAPITAL
βLevered, Comparable
Pure-play Method Project βUnlevered, Comparable = t = Tax rate
Beta
(De-lever) [( D
1 + (1 - tComparable) Comparable
EComparable )] D = Debt
E = Equity

Pure-play Method for

[ ( )]
DProject
Subject Firm βLevered, Project = βUnlevered, Comparable 1 + (1 - tProject)
(Re-lever) EProject

Adjusted CAPM E(Ri) = RF + βi [E (RM) - RF + Country risk premium]

(for country risk premium)

( )
σ of equity
Country Risk index of the developing country
Premium CRP = Sovereign yield spread x
σ of sovereign bond market in terms
of the developed market currency

σ = Standard deviation

Amount of capital at which

the source’ s cost of capital changes
Break Point Break point =
Proportion of new capital
raised from the source
 Corporate Finance

MEASURES OF LEVERAGE

Degree of Operating Degree of Operating Percentage change in operating income

=
Leverage Leverage Percentage change in units sold

Degree of Financial Degree of Financial Percentage change in Net Income

=
Leverage Leverage Percentage change in EBIT

Degree of Total Degree of Total Percentage change in Net Income

=
Leverage Leverage Percentage change in number of Units Sold

Net Income
Return on Equity Return on Equity =
Shareholders’ Equity
(ROE)

P = Price per unit

The Breakeven V = Variable cost per unit
F+C F = Fixed operating costs
Quantity of Sales QBreakeven =
P-V C = Fixed financial cost
Q = Quantity of units produced and sold

P = Price per unit

Operating Breakeven F
QOperating Breakeven = P - V V = Variable cost per unit
Quantity of Sales F = Fixed operating costs
 Corporate Finance

WORKING CAPITAL MANAGEMENT

Current assets
Current Ratio Current Ratio =
Current liabilities
Cash + Receivables + Short-term marketable investments
Quick Ratio Quick Ratio =
Current liabilities

Accounts Receivable Credit sales

Accounts Receivable Turnover =
Turnover Average receivables

Number of Days of 365

Number of days of receivables =
Receivables Accounts receivable turnover
Cost of goods sold
Inventory Turnover Inventory Turnover =
Average Inventory
Number of Days of 365
Inventory Number of Days of Inventory =
Inventory turnover
Purchases
Payables Turnover Payables Turnover Ratio =
Average accounts payables

Number of Days of 365

Number of Days of Payables =
Payables Payables turnover ratio
Net operating cycle = Number of days of inventory
Net Operating Cycle + Number of days of receivables
- Number of days of payables
D = Dollar discount, which is equal to the
difference between the face value of
Yield on a Bank D 360 the bill (F) and its purchase price (P0)
rBD = x
Discount Basis (BDY) F t F = Face value of the T-bill
t = Actual number of days remaining to maturity
rBD = Annualized yield on a bank discount basis

Effective Annual Yield 360

EAY = ( 1 + HPR) t
-1
(EAY)
(Cashflow ending value - Beginning value + Cashflow received)
Holding Period Return HPR =
Beginning value
360

( %Discount
)
Number of days
Cost of Trade Credit Cost of trade credit = 1+
past discount
-1
1 - %Discount

Interest + Dealer’ s commission + Other costs

Cost of Borrowing Cost of borrowing =
Loan amount - Interest
Alternative
Investments

05
 Alternative Investments
Total Debt * This is one of several definitions and
Leverage Ratio* Leverage = formulas for leverage, also known as
Total Equity Debt-to-Equity ratio
n

Σ (R - R
√
Volatility Ri = Individual returns data points
(standard deviation of i avg
)2 Ravg = Average of all return data
returns) - population i=1 points in the set
σ= n n = Number of data points
n

Σ
√
Ri = Individual returns data points
Volatility (Ri - Ravg)2 Ravg = Average of all return data
(standard deviation of i=1 points in the set
returns) - sample σ= n-1 n = Number of data points
Rp = Portfolio return
Rp - Rf Rf = Risk-free rate of return
Sharpe Ratio Sharpe Ratio = σ σp = Standard deviation
p
(volatility) of portfolio return
Rp = Portfolio return
Rp - Rf Rf = Risk-free rate of return
Sortino Ratio Sortino Ratio = σd σp = Standard deviation (volatility)
of the downside (“downside risk”)
Ri = Individual returns data points
n Rtreshold = Return threshold
Downside Risk
(semi-deviation) - population
σd =
√ Σ (R - R
i=1
i

n
)2
treshold
(determined by the user, for example
the risk-free rate, hard target return or
0% can be used)
n = Number of data points
Ri = Individual returns data points
n

√Σ
Rtreshold = Return threshold
Downside Risk (Ri - Rtreshold)2 (determined by the user, for example
(semi-deviation) - sample i=1 the risk-free rate, hard target return or
σd = n-1 0% can be used)
n = Number of data points

Σ
N
Discounted Cash Flow CFt CFt = Cash flow in time t
DCF = Net Present Value DCF = NPV = (1 + r)t r = Discount rate
(NPV) of an investment t=0

Capitalization Rate Net Operating Income (NOI)

(Cap Rate) Cap rate =
Market Value (or purchase price of property)

FFO = Net Income

Funds From Operations
(FFO) + Depreciation (and other non-cash items)
- Gains/Losses from property sales (and other non-recurring items)

Adjusted Funds From

AFFO = FFO – Recurring Capital Expenditures (CAPEX)
Operations (AFFO)

Net Asset Value per share NAV

(NAV per share) NAV per share =
Total number of shares outstanding
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