Finance Cheatsheet

Finance Cheatsheet - Purchase new car in 5-years. $1000,...

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Purchase new car in 5-years. $1000, end of each 5 years. 6% compounded annum. How much will you have after 5-years? N=5 PMT= -1000 PV=0 FV=? FV= 5637 If asks for beginning switch to begin mode. PV=CF/I EQUATIONS Future value of multiple cash flows: NPV( Discount rate,yr0 CF, {CF1,CF2,CF3}, {FreqCF1, Freq cf2})* (1+Discount rate)^years Annuity Present value(pay equal payments ) PV= C*([1-{1/(1+r)^t}]/r); Fv=C*({(1+r)^t-1}/r) PV perpetuity= C/r (eg. Preferred stock) r=Dividend/ price per share Growing annuity PV =C*{(1-((1+g)/(1+r))^t)/(r-g)} EAR= {1+(Quoted rate/m)}^m – 1 or Eff( Nom APR, # periods) Growing perpetuity PV =C/(r-g) APR: Nom(Eff, # periods) =Interest rate per period* # or periods per year Irr(Yr0 CF or pv, {CF1,CF2,,,CFN}) to calculate interest with uneven cash flow Continuous Compounding: EAR=e^q -1 Interest-only Loans (borrower pays interest each period and pays the entire principle at one point in the future). Yr1-Y(n-1)=C*r, Yn=C*r+C Coupon rate =annual coupon/face value Current yield =a bond’s annual coupon*Fv/price=pmt/pv Price of bond: PV percentage of face value Bond value= C*[1-1/(1+r)^t]/r+F/(1+r)^t=PV coupons +PV face amount PMT->PV+ FV 1000-> PV Yield to maturity(YTM) use TVM solver 1+R(nominal rate)=(1+r(real rate))*(1+h(inflation)) R≈r+h PMT: bond value FV:1000 to get PV. Po=D1/(1+R)+ D2/(1+R)^2 + D3/(1+R)^3… Po: current price of stock P1:price in one period D1:cash dividend paid at the end of the period Perpetuity: Po=(D1+P1)/(1+R) Equity: ownership, vote, div not cost not tax dedu, div not liability no legal source, cannot bankrupt no debt P: value of stock D:dividend R:required return Zero Growth: Po=D/R Do:dividend JUST paid, g: growth rate Constant Growth:Dt=Do*(1+g)^t R=Dividend yield+Capital gain yield=D1/Po + g=Do(1+g)/Po where g=(p1-p0)/p0=(D1-D0)/D0 Dividen d Growth Model: Po=Do( 1+g)/(R- g)paid or =D1/(R- g) PV0 =C1/(R- g)=Co(1 +g)/(R- g) Noncon stant growth: npv(R,C Fo,{Cf1, cf2,,,(CF n+Pn)}) Pn=Dn* (1 +g)/(R- g) Project total CF =Projected operating CF-Project Δnwc-Project CS Operating CF= EBIT(sale-cogs-dep)+dep-tax CFFA=ocf-ncs-Δnwc Cf, cash income =sales-increase in a/c outflow=cost-change in a/p After-tax salvage=salvage-T(salvage-book value) Bv=initial cost-accumulated dep Straight line D=(initialcost-salvage)/number of years Discounted payback: y0 cf-PV of yr1,year1 –year2,…. Npv(discount rate, cf0,{…} Profitability Index=pv/initial cost Crossover: Mirr: R(return)=r(ri skfree)+r(risk premium)*bet a=r(treasury)+ (R expected return-R treasury)*risk
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