Com 92 corporate finance overview of formulas certain

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Unformatted text preview: ssets debt equity rdebt  requity debt  equity debt  equity Company cost of capital with preferred stocks debt common equity preferred equity (37) Company cost of capital rdebt  rcommon  rpreferred firm value firm value firm value Cost of preferred stocks (38) Cost of preferred stocks rpreferred DIV P Download free ebooks at bookboon.com 92 Corporate Finance Overview of formulas Certain cash flow (39) Certain cash flow PV ˜ (1  r ) Free cash flow (40) profit after tax  depreciation  investment in fixed assets Free cash flow  investment in working capital Present value of project using free cash flows and weighted average cost of capital (41) PV FCFt PVt FCF1 FCF2  "  2 t (1  WACC ) (1  WACC ) (1  WACC ) (1  WACC ) t Weighted average cost of capital (no corporate taxation) (42) rA D E rD  rE DE DE Miller and Modigliani Proposition II rE rA  rA  rD D E Please click the advert (43) Download free ebooks at bookboon.com 93 Corporate Finance Overview of formulas Beta on assets (44) EA D· § E· § ¨ED ˜ ¸  ¨EE ˜ ¸ V¹ © V¹ © Beta on equity (45) EE E A  E A  E D D E Present value of tax shield (46) PV(Tax shield) interest payment ˜ corporate tax rate expeced return on debt rD D ˜ TC rD D ˜ TC Value of firm with corporate taxes and cost of financial distress (47) Value of firm = Value if all-equity financed + PV(tax shield) - PV(cost of financial distress) Weighted average cost of capital with corporate taxation (48) §E· §D· rD (1 ...
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This note was uploaded on 10/26/2012 for the course 19 19 taught by Professor - during the Spring '12 term at Sunway University College.

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