# formula_2 - FIN 300 Review Second half Note that this...

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Unformatted text preview: FIN 300 Review: Second half Note that this document does NOT exhaust everything required in the final. The final exam covers everything in the lecture notes unless specified otherwise (please refer to the review at the end/beginning of each lecture note). This document covers the formulas that I think are most important and covered in the second half of the class. Materials that do not involve formulas are not included and please refer to the lecture notes, for example, market efficiency and definitions of forwards, futures, and swaps. You should go over the lecture notes thoroughly because the exam will follow closely with the materials covered in the lecture notes. The final exam is cumulative with the focus of the second half. You will use the knowledge from the first half but there won’t be questions only about the materials before the midterm. 1 Project analysis • Scenario analysis: best case corresponds to the case where each parameter, e.g., sales or costs, takes the value that maximizes the NPV of the project. This is the most optimistic estimation; worst case corresponds to the case where each parameter takes the value that minimizes the NPV of the project. This is the most pessimistic estimation. • Sensitivity analysis: each parameter takes its base-case value except one parameter. By varying this one parameter’s value while keeping other parameters at their base-case values, we can tell how sensitive the NPV is to this particular parameter. • Break-even analysis: keep all the other parameters at their base-case values except one parameter. Vary the value of this parameter such that 1. NPV=0: financial break-even (the most important break-even) 2. UOCF=0: cash break-even 1 2 Portfolio theory • For a portfolio with N assets and portfolio weight w , its expected return, variance, and beta are given by the following formulas 1 = N X i =1 w i R p = N X i =1 w i R i β p = N X i =1 w i β i V AR ( R p ) = N X i =1 N X j =1 w i w j COV ( R i...
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formula_2 - FIN 300 Review Second half Note that this...

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