W10FIN3300_Formula_3

W10FIN3300_Formula_3 - Winter 2010 FIN 3300 Some Useful...

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Winter 2010 FIN 3300: Some Useful Formulas for Final Exam [1 + (APR/m)] m – 1 = EAR APR = (Rare per period) x m 1 + nominal rate = (1 + real rate) (1 + inflation rate) Î (1+RR) = (1+NR) / (1+i) Bond Valuation: Given PMT, N, FV, r, compute PV Yield to Maturity (YTM): Given PMT, N, FV, bond price, compute I/YR r = (DIV 1 / P 0 ) + [(P 1 – P 0 )/ P 0 ] g = (ROE)(Plowback ratio) P 0 = DIV 1 /(r – g) = [DIV 0 (1 + g)]/(r – g) Î r = (DIV 1 / P 0 ) + g P n = DIV n+1 /(r – g) = P 0 (1+g) n PVGO = P 0 – (EPS 1 /r) Corporate Investment Decision Criteria : NPV, IRR, EAC, EAA, Payback Period PV of cost +/- project life N r PMT Æ EAC NPV +/- project life N r PMT Æ EAA CFj = (S – C – Depr)(1 – T) + Depr – Increase in NWC
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