AFM formula.pdf - lOMoARcPSD|3419660 Final formulas...

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Final formulas
Managerial Finance 1 (University of Waterloo)
StuDocu is not sponsored or endorsed by any college or university
Final formulas
Managerial Finance 1 (University of Waterloo)
Downloaded by Tanija Singh ([email protected])
lOMoARcPSD|3419660

AFM 272/273 Final Exam Formula Sheets Fall 2017
Financial Statement Analysis:
• enterprise value:
Enterprise value = Market Value of Equity + Debt − Cash
• gross margin and operating margin:
Gross Margin =
Gross Profit
Sales
Operating Margin =
Operating Income
Sales
• return on equity, net profit margin, asset turnover, equity multiplier, and DuPont identity:
ROE =
Net Income
Book Value of Equity
=
Net Profit Margin
bracehtipdownleft bracehtipuprightbracehtipupleft bracehtipdownright
parenleftbigg
Net Income
Sales
parenrightbigg
×
Asset Turnover
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parenleftbigg
Sales
Total Assets
parenrightbigg
×
Equity Multiplier
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parenleftbigg
Total Assets
Book Value of Equity
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DuPont Identity
• price-earnings ratio:
P/E Ratio =
Market Capitalization
Net Income
=
Share Price
EPS
Time Value of Money:
• compounding and discounting with an interest rate of r per period:
– to compound a cash flow for n periods, multiply it by (1 + r )
n
– to discount a cash flow for n periods, divide it by (1 + r ) n or multiply it by (1 + r ) − n
• PV of a stream of cash flows C
0
, C
1
, C
2
, . . . , C
n
occurring at the end of period 0 , 1 , 2 , . . . , n respectively,
with an interest rate of r per period:
PV
0
=
n summationdisplay
t =0
C
t
(1 + r ) t
• PV of a regular perpetuity paying C per period, discount rate of r per period, as of one period before
the first payment:
PV
0
=
C
r
• PV of a regular annuity paying C per period for n periods, discount rate of r per period, as of one
period before the first payment:
PV
0
= C × A
n
r
where A
n
r
=
1
r
bracketleftbigg
1 −
1
(1 + r ) n
bracketrightbigg
• PV of a growing perpetuity, first payment of C
1
, growth rate of g per period, discount rate of r per
period, as of one period before the first payment:
PV
0
=
C
1
r − g
( g < r )
1
Downloaded by Tanija Singh ([email protected])
lOMoARcPSD|3419660

• PV of a growing annuity, first payment of C
1
, growth rate of g per period, discount rate of r per
period, as of one period before the first payment:
PV
0
=
C
1
r − g
bracketleftbigg
1 −
parenleftbigg
1 + g
1 + r
parenrightbigg
n
bracketrightbigg
( g negationslash = r )
• IRR per period of an investment which costs P today and pays a single cash flow n periods from today
of F :
IRR =
parenleftbigg
F
P
parenrightbigg
1 /n
− 1
• IRR per period of an investment which costs P