FormulaSheet

FormulaSheet - n r-g # Growing Perpetuity with...

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Formula sheet Note: No further explanation will be given for these formulas at the examinations. Student should know what each variable stands for. Sustainable growth rate (Covered in Ch.3) g = p (1 - d )(1 + D E ) T - p (1 - d )(1 + D E ) Alternative formulas for sustainable growth rate (Covered in Ch.3) If ROE is defined as the ratio of the current year’s net income to the previous year’s equity g = ROE × (1 - d ) If ROE is defined as the ratio of the current year’s net income to the current year’s equity g = ROE × (1 - d ) 1 - ROE × (1 - d ) Growing annuity (Covered in Ch. 5) PV = n X t =1 C (1 + g ) t - 1 (1 + r ) t = C " 1 - ( 1+ g 1+ r )
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Unformatted text preview: n r-g # Growing Perpetuity with differential growth (Covered in Ch. 5 and 6) Assuming g 1 for the first n payments and g 2 thereafter, PV = C " 1-( 1+ g 1 1+ r ) n r-g 1 + (1 + g 1 ) n-1 (1 + g 2 ) r-g 2 × 1 (1 + r ) n # PV CCA Tax Shield (Covered in Ch.8) PV CCATS = CdT c k + d × 1 + 0 . 5 k 1 + k-min( C,S ) dT c k + d × 1 (1 + k ) n Black-Scholes formula for a call option (Covered in Ch. 23) c = S × N ( d 1 )-Ee-rT × N ( d 2 ) d 1 = ln( S/E ) + ( r + σ 2 2 ) T σ √ T d 2 = d 1-σ √ T 1...
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This note was uploaded on 04/24/2010 for the course ACTSC 371 taught by Professor Wood during the Spring '08 term at Waterloo.

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