Standalone asset: - Grand Valley State University



Formula Sheet for FIN320Chapter Two:NWC = CA – CLEarnings per share = NI / total shares outstandingDividends per share = total dividends / total shares outstandingCFFA = OCF – NCS – Change in NWCCFFA = CF to creditors + CF to shareholdersOCF = EBIT + depreciation – taxesNCS = ending FA – beginning FANCS = ending NFA – beginning NFA + depreciationChange in NWC = ending NWC – beginning NWCCF to creditors = interest paid – net new borrowingCF to shareholders = dividends paid – net new equity raisedAverage tax rate = total taxes paid / total taxable incomeCorporate Tax TableOver -But not over -Tax Rate$050,00015%50,00075,00025%75,000100,00034%100,000335,00039%335,00010,000,00034%10,000,00015,000,00035%15,000,00018,333,33338%18,333,333--35%Chapter Three (ratios in alphabetical order – you must know how to common size financial statements):Book value per share = TE / number of shares outstandingCash coverage ratio = (EBIT + depreciation) / interestCash ratio = cash / CLCurrent ratio = CA / CLDays sales in inventory = 365 / inventory turnoverDays sales in receivables = 365 / receivables turnoverDebt ratio = TD / TA = (TA – TE) / TA Debt-to-equity (D/E) ratio = TD / TEDividend payout ratio = Cash dividends / NIDividends per share = total dividends / total shares outstandingEarnings per share = NI / total shares outstandingEBITDA ratio = Enterprise value / EBITDAEnterprise value = Total MV of the stock + BV of all liabilities – CashEquity multiplier = TA / TE = 1 + D/E ratioInternal growth rate = (ROA x b) / [1 – (ROA x b)]Inventory turnover = COGS / InventoryMarket-to-book ratio = Market value per share / BVPSPrice earnings (PE) ratio = Price per share / EPSPrice-sales ratio = Price per share / Sales per shareProfit margin = NI / SalesQuick ratio = (CA – inventory) / CLReceivables turnover = Sales / ARRetention ratio (b) = Addition to RE / NIReturn on assets = NI / TAReturn on equity = NI / TESustainable growth rate = (ROE x b) / [1 – (ROE x b)]Times interest earned = EBIT / interestTotal asset turnover = Sales / TADuPont Equations:Return on assets = PM x TATReturn on equity = ROA x EMReturn on equity = PM x TAT x EMChapter Four: (know how to use your calculator to solve TVM problems)FVt = PV + (PV x r x t)PV = FVt / (1 + r)tFVt = PV x (1 + r)tr = (FVt / PV)(1/t) - 1t = ln(FVt / PV) / ln(1 + r)Chapter Five: (know how to use your calculator to solve TVM problems)PVann = C x { [ 1 – ( 1 / (1 + r)t ) ] / r }FVann = C x { [ (1 + r)t – 1 ] / r }PVperp = C / rPVann = C x { [ 1 – ((1 + g) / (1 + r)) t ] / (r – g) }FVann = C x { [ (1 + r)t – (1 + g)t ] / (r – g) }PVperp = C / (r – g)PV = FV x e-rtFV = PV x ertAPR = periodic rate x mEAR = (1 + [quoted rate / m])m – 1Rule of 72: r x t = 72Amortization: Interest paid = Interest rate x Beginning balance Principal paid = Payment – Interest paid Ending balance = Beginning balance – Principal paidChapter Six: (know how to use your calculator to solve bond problems)Value of bond = { C x [ 1 – ( 1 / (1 + r)t ) ] / r } + { F / (1 + r)t }YTM = CY + CGYCY = annual coupon payment / current priceFisher Effect Actual: (1 + R) = (1 + r) x (1 + h)Fisher Effect Approximation: R = r + hChapter Seven:Preferred: P0 = D / R Common:Constant growth dividend models:Dt = D0 x (1 + g)tP0 = [ D0 (1 + g) ] / (R – g) P0 = D1 / (R – g) Pt = [ Dt (1 + g) ] / (R – g)Pt = Dt+1 / (R – g)Pt = P0 x (1 + g)tR = ( [ D0 (1 + g) ] / P0) + gR = ( D1 / P0 ) + gR = DY + CGYPt = Benchmark PE ratio x EPStPt = Benchmark price-sales ratio x Sales per sharetChapter Eight: (know how to use your calculator to solve for NPV and IRR)PI = PV of future cash flows / initial investmentPI = (NPV + initial investment) / initial investmentChapter Ten: (know how to use your calculator to solve for the historical average return and standard deviation)Coupon payment = (coupon rate x face value) / number of coupon payments per periodInvestment income: dividends paid OR coupon paymentsCapital gain (or loss) = ending price – beginning priceTotal $ return = investment income + capital gain (or loss)Dividend (stock) OR Current (bond) yield = investment income / beginning priceCapital gains yield = (ending price – beginning price) / beginning priceTotal % return = (investment income + (ending price – beginning price)) / beginning priceArithmetic Average Return = (R1 + R2 + R3 + … + RT) / TGeometric Average Return = [(1 + R1) x (1 + R2) x … x (1 + RT)](1/T) - 1Chapter Eleven:Risk Premium = E(R) - RfStandalone asset:Expected return:ER=i=1NpiERiVariance:VarR=i=1NpiERi-ER2Standard deviation:Std Deviation(R)= Var(R)Portfolios:M = total number of assets in the portfolioN = total number of states of the economywj = ($ amount invested in asset j) / (total $ amount of portfolio)Rp,i = return of the portfolio in economic state iRj,i = return of asset j in economic state ipi = probability of economic state iReturn, variance, standard deviation of the portfolio: Rp,i=j=1MwjRj,iERp&=j=1MwjERjERp&=i=1NpiRp,iVarRp&=i=1NpiRp,i-ERp2Std DeviationRp&=VarRpPortfolio beta:βP=j=1MwjβjReward to risk slope:ERA-RfβASecurity market line or capital asset pricing model:ERA=Rf+ERM-Rfmarket risk premium×βAChapter Twelve:Weighted average cost of capital:WACC&=EV×RE&&+PV×RP&&+DV×RD×1-TC&=wERE&&+wPRP&&+wDRD1-TCRE = (D1 / P0) + gRE = {[D0 (1 + g)] /P0} + gRE = Rf + [E(Rm) – Rf] x ?RP = D / P0RD: YTM on bond of similar risk and maturitymarket value = (market price)(number of issues outstanding)V = E + P + DwE = E / VwP = P / VwD = D / V ................
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