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Chapter 2
Future Value
= Present Value (1 + Interest) ^ N
Present Value
= Future Value / (1 + Interest) ^ N
Ordinary (Deferred) Annuity
= Payments Occur at the
End of the period = END MODE
Annuity Due
= Payments whose Payments occurs at the
begging of the period = BEGIN MODE
Future Value Ordinary Annuity
= Payment [((1 + I) ^
N) – 1 / I]
Present Value Ordinary Annuity
= Payment [(1 – (1 /
((1 + I) ^ N)) / I)]
Present Value Perpetuity
= Payment / Interest
Uneven Cash Flows Present Value
= NPV (Interest,
Initial Outlay, {Cash Flow Per Period})
Interest with Uneven Cash Flows
= IRR ( Payment,
{Cash Flow Per Period})
When Compounded Semi Annual and other Compounding
Periods:
Periodic Rate
= Stated annual rate / Number of Payments
per year
Number of Periods
= (Number of years)(Periods per
year)
Effective Annual Rate (EFF% or EAR)
= ((1 + (Interest
/Periods Per Year)) ^ Periods Per Year) – 1
Comparing Two Different Interest Rates with Two
Different Periods:
EFF %
( Nominal Interest Rate, Number of
Periods 1)
NOM
(Eff%, Number of Periods 2)
Uneven cash flow
to solve for PV do npv(i, CFo{CF1,
CF2, CF3….})
Rule of 72
= 72/i= # of years for sum to double
Extra lump sum for cash flow
: lump goes into FV and
PMT how much each time
If not annual eff> than nom
To solve eff on the calc (nom rate, # of periods) then
subtract difference
Retirement questions solve for fv then make fv into pv and
solve for pmt
Pv interest factors always<1, dollars today worth more
than in the future
, solver for eff than take value put in nom
Chapter 3
Net Sales
Operating Costs except depreciation
= Earnings before interest, taxes, and depreciation (
EBITDA
)
Depreciation
= Earnings before interest and taxes (Operating Income) (
EBIT
)
Interest
= Earnings before Taxes (EBT)
Taxes
=
Net Income

Common Dividends
= Addition to Retained Earnings
Earnings Per Share
= EPS =
Net Income
/ Common Shares Outstanding
Dividends Per Share
= DPS = Dividends Paid to common sock holders / Common
Shares Outstanding
Book Value Per Share
= BVPS =
Total Common Equity
/ Common Shares
Outstanding
Cash Flow Per Share
= CFPS =
Net Income
+ Depreciation + Amortization /
Common Shares Outstanding
Balance Sheet
ASSETS
Cash + Accounts Receivable + Inventories = TOTAL CURRENT ASSESTS
Gross Fixed Assets – Accumulated Depreciation = NET FIXED ASSETS
TOTAL CURRENT ASSETS + NET FIXED ASSETS =
TOTAL ASSETS
LIABILITIES AND EQUITY
Accounts Payable + Notes Payable + Accruals = TOTAL CURRENT
LIABILITIES
Long Term Debt + Common Stock ( # Of Shares ) + Retained Earnings = TOTAL
EQUITY
TOTAL CURRENT LIABILITES + TOTAL EQUITY =
TOTAL LIABILITIES
AND EQUITY
EBIT
=
Sales
Revenues – Operating Costs
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 Spring '08
 WHITE
 Finance, Annuity, Future Value, Interest, Net Income, Generally Accepted Accounting Principles

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