Advance Finance Final Cheat Sheet

Advance Finance Final Cheat Sheet - RE= RA+D/E...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
R E = R A +D/E (R A -R D )(1-T C ) R A =R U R i = R f + B i (R M -R f ) MRP= (R M -R f ) No Taxes: V L =V U R E = R u +(R u -R D )(D/E) With Taxes: V L =V U + T c D R E = R u +(R u -R D )(D/E)(1-T c ) WACC= (E/V)R E +(D/V)R D (1-T C ) If leverage Changes so does cost of Equity, Cost of Debt B E = B A +(B A -B D )(D/E)(1-T c ) Always Average Beta of Assets not Beta of Equity V u = (FCF)/(R A )=EBIT(1-T C )/R A V L = (EBIT(1-T c ))/(WACC)=(FCF)/(WACC) V L = V u +PVTS PVTS=T C D Sales Growing Perp.=FCF(1+G)/(WACC-G) -Costs of Goods Sold EBITDA=Sales-Costs of Goods Sold -Depreciation EBIT -Taxes =(T C )(Ebit) EBIT(1-T C ) + Depreciation -Capital Expenditure - Increase in Working Capital Free Cash Flows Π = (Probability of A)*(# of shares sold/# of shares Bid if Price=A)*(Number of Shares Issued)*(A-Fair Price) + (Probability of B)*(# of shares sold/# of shares Bid if Price=B)*(Number of Shares Issued)*(B-Fair Price) Figuring out Contribution to correct Overinvestment CF RE PCF Total Debt Left New Equity Old Equity Good X C Y X+Y+C A X+Y+C- A 2c X+Y-C-A Bad X C Z X+Z+C X+Z+C 0 0 0 Expec. Val Must = 2C >Val w/o Project Expected value of Senior Debt, subordinate debt or New Equity must all = atleast the investment In the event of bankruptcy or insolvency, debt has priority over equity. As a result, equity holders take on more risk than debt holders
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Advance Finance Final Cheat Sheet - RE= RA+D/E...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online