Formulas for Finance

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					                                     FINC 3511 - Corporate Finance - Formulas


Net income = (EBIT - INT)(1 - tax rate)                       Operating cash flow = NOPAT + Dep

NOPAT = EBIT(1 - tax rate)                                    Net cash flow = Net income + (Dep + Amort)

MVA = (shares outstanding)(stock price) - (total common equity)

EVA = EBIT(1 - tax rate) - (investor supplied capital)(percentage cost of capital)

Current assets = cash + marketable securities + inventory + accounts receivable

Current ratio = current assets                        Basic earning = EBIT
               current liabilities                    power          Total assets

Inventory turnover =   sales                          Times interest =      EBIT
ratio                inventory                        earned           Interest charges

Quick ratio = current assets - inventory              Fixed asset =     Sales
               current liabilities                    turnover      Net fixed assets

Days sales =    receivables                       EBITDA Coverage =   EBITDA + Lease Payments
outstanding (annual sales)/365                    Ratio             Interest + Principal + Lease
                                                                    Charges pmts           pmts

Debt ratio =    total debt                            Total asset =      Sales
               total assets                           Turnover         total assets

Net profit =   Net income                             Price earnings   = Price per share
margin         sales                                  ratio              Earnings per share

Market/Book = Market price per share
ratio         Book price per share


Return on total assets =       Net income      = (Net profit margin)(Total asset turnover)
                               Total assets

Return on common equity = Net income    = (net profit margin)(total asset turnover)(1/(1 – debt ratio))
                          common equity

projected account balance = (old account balance)[(new sales)/(old sales)]

Change in retained earnings = (net profit margin)(sales) – dividends

Additional funds needed = projected assets – (projected liabilities + projected equity)
      n                                       n                              n

k i = ∑ k i pi
ˆ                                       k P = ∑ wi k i
                                        ˆ          ˆ                  b P = ∑ wi b i                ki = kRF + bi (kM –kRF)
     i =1                                    i=1                            i=1



                                                                         
                                                                         
                                                                         
                                  n*m
            i                                                                                                                n
                                                                   1
FVn = PV 1 +                                                                                      FVA n = PMT ∑ (1 + i )
                                                                                                                                       n- t
                                                   PV = FVn          n*m 
          m                                                1 + i                                                     t =1
                                                             m 
                                                                    

              n 
                      1 
                                                                                                     m
                                                                                            i 
PVA n = PMT ∑   
                            
                           t
                                                                                  EAR =  1 + 
            t =1  (1 + i )                                                             m

                                           
                                           
     INT N*m      1              1                                                                      D
VB =     ∑
      m t=1   k b  t
                          +M            N* m                                                      VP =
                               1+ k b                                                                   kP
               1+ m       m 
                                   

Current yield = (annual interest payment)/(current price)

Yield-to-maturity = current yield + capital gain/loss

                                                                                                              DNS (1 + gC) 
                                                                                                         t                  
      (1 + g)                                                                          NS
                                                                                            D0 (1 + gS )  k S - gC 
ˆ D0
P0 =          = D1                                                                P0 = ∑
                                                                                  ˆ                    t
                                                                                                           +
     ks - g    ks - g                                                                  t =1  (1 + k s )         (1 + k s )NS

                  N    1              1                                                                 D
( VB - FC) = INT  ∑                         
                  (1 + B )t  + M  (1 + B )N 
                                                                                           ( Vps - FC) =
                  t =1 kd             kd                                                                kps

                    D1
(P0 - FC) =
 ˆ                                                 WACC = w d k B (1 - t) + w p kps + w s k s
                                                                d
                   ks - g

Breakpoint total dollar amount of retained earnings available
          =
 (equity)        fraction of equity in the capital structure

                                                                                                                           n

            n
                    CFt                                           n
                                                                           CFt                       n
                                                                                                           COFt           ∑ CIF (1+ k )
                                                                                                                                   t
                                                                                                                                              n- t


NPV = ∑
            t =1   (1 + k )   t
                                  − IO                     IO = ∑
                                                                 t =1   (1 + IRR )   t              ∑ (1 + k )
                                                                                                    t= 0
                                                                                                                  t
                                                                                                                      =   t= 0

                                                                                                                               (1+ MIRR )n

				
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