Corporate Finance Formula Sheet

Corporate Finance Formula Sheet Legend Key for TVM Formulae Future Value - Regular Annuity r= required rate of return, interest or discount rate per period n= number of periods C= periodic cash flow payment g= periodic growth rate  (1  r) n  1  FV  C    r   Present Value - Regular Annuity 1  1  (1  r) n PV  C   r    Future Value Lump Sum - Simple Interest FV = PV (1+nr)       Present Value - Annuity Due 1   1  (1  r) n PVD  C   r    Future Value Lump Sum - Compound Interest FV = PV (1+r) n   (1  r )    Present Value Lump Sum - Compound Interest PV  Future Value - Annuity Due FV (1  r)n FVD  FVRe gularAnn(1  r) Future Value - Annuity Due Present Value of a Perpetual Annuity PV   (1 r )n  1 FVD  C    (1  r ) r   AnnuityPayment r Effective Annual Rate of Interest Present Value of a Finite Growing Annuity n i  EAR  1   1  n PV  n C  1  g     1   r  g   1  r   i= quoted annual percentage rate & n= number of compounding periods per year. Periodic Rate of Interest Effective Annual Rate - Continuous Compounding i   r  1   m   m f  1 or r  1  EAR  n  1 1 i= quoted annual percentage rate, m=compounding frequency of quoted rate, f= frequency of compounding of required periodic rate & n= number of compounding periods per year. EAR  e q  1 q= quoted rate e= 2.718281828 Annual Periodic Rate of Interest Price of Preferred Shares APR  n1  EAR  1 n  1  P0  D r Corporate Finance Formula Sheet Price of Common Shares Stock Price after committed new growth projects P0  D1 r g EPS  NPVGO r P0  Bond Price Current Bond Yield 1    1 (1  r ) n  FaceValue  B  C  (1  r) n r     Annual Interest Payment Current Yield  Current Bond Price Total Dollar Return (TDR) = Dividend Income Fisher Effect - Real Rate of Return + Capital Gain/(Loss) 1  R  (1  r )  (1  inflation rate) CF   PE  PB  CFt  PC TDR  t  PB PB R= nominal rate of return r= real rate of return Expected Return (in general) Expected Portfolio Return (in general) E ( R)   O j  Pj E(RP )  x1  E(R1 )  x2  E( R2 )  ...  x n  E( Rn ) j Variance of returns (in general) Standard Deviation of a 2 Stock Portfolio  P  xL2  L2  xU2  U2  2x L xU  LU   2  O j 2  E (R )  P j j Covariance of 2 Securities Standard Deviation of a 2 Security Portfolio  ij  CORRi, j  i  j  P  x L2  L2  xU2  U2  2x L xU CORRL ,U  L  U Beta of a Stock A Historical Variance COV (R A, R M )   2 ( RM ) or A  CORR L, Mkt L Mkt 2   2 (R Mkt ) ( R  R) 2 1  ...  ( RT  R ) 2 T 1  Capital Asset Pricing Model E (Ri )  r f  [E (RM )  r f ]i Arbitrage Pricing Theory    E( R)  R f   1 E( R1 )  R f  2 E( R2 )  Rf  ...  n E( Rn )  R f  Profitability Index  Present value of cash inflows Present value of cash outflows PV of CCA tax shield  CdT 1  0.5  k   S n dT  1   (d  k )  1  k   ( d  k )  (1  k ) n d= CCA rate, T= tax rate, k=cost of capital or required rate of return & S= salvage value. Current Ratio = Current Assets Current Liabilities Total Asset Turnover = Sales Total Assets Inventory Turnover = COGS Inventory ROE = Net Income Total Equity    Corporate Finance Formula Sheet Quick Ratio = Current Assets-Inventory Current Liabilities ROA Cash Ratio = Cash Current Liabilities P/E Ratio Receivables Turnover = Sales Accounts Receivable Dividend Payout Ratio = DPS EPS D/E Ratio = Total Debt Total Equity Dividend Payout Ratio = Cash Dividends Net Income Total Debt Ratio = Total Debt Total Assets Market to Book Ratio = Net Income Total Assets = Price/common share EPS = Price / Common share Book value of equity Equity multiplier = Total Assets Total Equity Profit Margin = Net Income Sales Net Working Capital to Total Assets = Net Working Capital Total Assets Interval Measure = Current Assets Average Daily Operating Costs Long Term Debt Ratio = Long Term Debt Total Equity + LT Debt Cash Coverage Ratio = EBIT + Depreciation Interest Days’ Sales in Receivables = 365 Days Receivables Turnover Days’ Sales in Inventory = 365 Days Inventory Turnover Internal Growth Rate = ROA x R 1 – ROA x R ‘Sustainable Growth Rate = ROE x R 1 – ROE x R NWC Turnover = Sales NWC ‘Sustainable Growth Rate = p(S/A)(1+D/E) x R 1 – p(S/A)(1+D/E) x R Times Interest Earned = EBIT Interest Charges Fixed Asset Turnover = Sales Net Fixed Assets Du Pont Identity ROE = Profit Margin x Total Asset Turnover x Equity Multiplier Cash Flow Identity CF from Assets = Operating CF – Cap Ex – Additions to Net Working Capital Operating CF = EBIT + Depreciation – Tax = Sales – Costs – Taxes = (Sales – Costs) x (1 – Tax rate) + Depreciation x Tax rate Cap Ex = End Gross Fixed Assets – Beg Gross Fixed Assets Cap Ex = End Net FA – Beg Net FA + Depreciation Additions to NWC = End NWC – Beg NWC CF to Debt holders = Interest – Net New Debt CF to Shareholders = Dividends – Net New Equity CF from Assets = CF to Debt holders + CF to Shareholders