formula fin 720.xlsx - E P0 E D1 E D1 RS g RF RM RF S g Ch...

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Ch 11Formulas:·Capital asset pricing ·Portfolio Beta·Portfolio required rat·Company WACC·Gordon modelgRRRDEgRDEPESFMFS])([)()()(110SSDDCOMPWWequitytheofbeta theVVequityfor theweight thedebttheofbeta theratiodebt thealso,VVdebtfor theweight thefirmtheofbeta theSDSSDDCOMPWWNNNJJJCOMPWWWW...22111Jproject for beta theVVJproject for weight theJJJW)(FMFRRRRNjjjPw1NjjjPRWR1DDCOMPWTRWWACC)1(RRRDEgRDEPEMFS([()()(10
Ch 13Formulasmodel·Net present value·Economic net present valuete of returnSSRWgRDSF]))1NtttKCFINPV10)1/(tNNtNttttNcttNtNRRKCFKKRRCFENPV)1()1()1()1()1(00
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Ch 14Formulas Cash+ Accounts receivable+ Inventory-Accounts payable-Accrued taxesNet working capitalNet working capital+ Operating long-term assetsOperating capitalEPS = P/E ratio =·Operating Capital·Percentage NPVOP·Economic value added (EVA) based on operating capital·Earnings per share (EPS)·P/E ratio·Profit margin·Asset turnover·Equity multiplieroutstandinsharesofNumber NIsharper Earnings(comshareper ueMarket valSalesincomeNet PMAssetsSalesATOcapitalOperatingNPVOPNPVOPPercentagecapital)Operating(WACC-T)-EBIT(1capitalofcost dollar -T)-EBIT(1EVACOMP
ROA=PM (ATO)ROE=ROA (EM) =PM (ATO) (EM)EVAM/B ratio = ·Du Pont Equation 1·Du Pont Equation 2:·EVA and percentage EVA based on book-value total assets·Market to book value ratio (M/B ratio)(equitystock common AssetsEMANIASalesSalesNIROA))((SAASalesSalesNIROE))()(([WACC-T)-EBIT(1ofcost dollar -T)-EBIT(1COMPasseTotalEVAEVAPercentageequityofBook valueequityofueMarket val
Join Effects of Investment and Financing Decisions on Equity ValueStock Valuegrowing perpetuity - Gordon Growth Modelstock value = Div*(1+g) / (R-g)16.57924.00%2%2{R=rf + b * (rm-rf) then rf + b * (RPm).}RPm=rm-rfGordon Growth ModelStock ValueValue of stock (present value) = D1/ (R - g)2010%Beta of a company0.010TO FIND Beta of Equity, Bs1.2 BcompTo find Beta of Debt, Bd1.2 BcompRs - Fair Return or Required returnrf - risk free rateB - Beta - Relative Risk Rs - Fair Return or Required returngRRRDEgRDEPESFMFS])([)()()(110SSDDCOMPWWNNNJJJCOMPWWWW...22111
Present Value PMT in PerpetuityN - yearsPVP=PMT/r0.125Debt Ratio effect on EarningsBalance Sheet(Market Value)Assets1000Debt200Equity80010001000State of economySlowAverageGrowingSales100150200-Fixed costs-60-60-60-Variable costs (20% of sales)-20-30-40Earnings before interest and taxes (EBIT)2060100Interest expenses-10-10-10Earnings before taxes (EBT)105090FV - Future Value (sometimes cash flows)R - rate / Fair Rate of Return-discount rate or yield
Dividend E(D1)13%35%15%0.10.10.90.20.120.81.470.20.120.81.47rm - expected returnRPm - Market risk premiumGrowth - Capital Gains Yield (Expected return on growth opportunites)Dividend E(D1)Growth - Capital Gains

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