FinQuiz
EINC = expected income component
(includes dividend yield &
reinvestment R)
11. CAPM: Required Return on share i =
Current expected Rf R + Bi (ERP)
where ERP = Expected R on mkt
portfolio RF R
Beta = Cov of returns with mkt R /mkt
portfolio va
FinQuiz
Formula Sheet
Decomposition and Analysis of the Cos
Valuation:
9. Parent Co. pro-rata share of
subsidiary/affiliates = (Subsidiarys share
price in FC Shares held by Parent Co.
X- rate)/Parent Co. total market
capitalization
10. Implied Value of P
FinQuiz
Formula Sheet
15. Interest rate volatility for a security with
Price of a 2-yr zero-coupon bond 1 yr
from today =
78[
maturity T at time t = (t, T) =
(191:8[1:)
Price of a 3-yr zero-coupon bond 1 yr
from today =
78[
(199:8[1:)
78[
=
C
D
FinQuiz
Formula Sheet
Level II 2017
Random walk with a drift = xt = b0 + x
t-1 + t where, b0 0 and b1 = 1
By taking first difference yt = xt - x t-1
= b0 + t
Reading 11: Time Series Analysis
1. Linear Trend Models = yt = b0 + b1t+ t
Predicted/fitted
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19. Goodwill Impairment Test under U.S.
GAAP (Two Step Approach)
Step 1: Goodwill Impairment Test
Impaired when CV of Reporting Unit
(including Goodwill) > FV of
Reporting Unit (including Goodwill).
Step 2: Measurement of Impairment
loss =
FinQuiz
Formula Sheet
Level II 2017
2. Goodwill = Cost of acquisition investors share of the FV of the net
identifiable assets
PP
Xxx
Less: (% of Ownership Interest BV of Investees Net
(xxx)
Assets)
= Excess Purchase Price
Xxx
Less: Attributable to Net As
FinQuiz
Formula Sheet
CEY = current earnings yield on the mkt.
index i.e. E/P.
CBY = current Moodys Investors Service
A-rated corporate bond yield.
LTEG = consensus 5-year earnings growth
rate forecast for the mkt index.
b = coefficient (measures weight,
FinQuiz
+ % in the price-to-earnings
multiple
4. A two-factor aggregate production
function: Y = AF (K, L)
5. Cobb-Douglas Production Function = F
(K, L) = K L1 -
6. Under the Cobb-Douglas production
function:
Marginal product of capital = MPK =
AK -1
FinQuiz
Formula Sheet
%S e f / d = i f id
Forward premium or discount:
For one year horizon =
Ff /d S f /d =
"i i %
S f /d $ f d ' S f /d (i f id )
# 1+ id &
Using day count convention:
( " Actual % +
* $
# 360 '& Ff /d S f /d = S f /d *
(i f id )
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= (Estimated stock price of Target
based on Comparables) (1 +
Takeover premium in %)
18. Target Shareholders gain = Premium = P T
VT
where,
P T = price paid for target company
V T = pre-merger value of target
company
Formula Sheet
VP: True Mis
FinQuiz
Formula Sheet
Level II 2017
Reading 16: Interoperate Investments
1. Summary of Accounting Treatment of Investments
Income Statement (I.S)
Held-tomaturity
Held
for
trading
security
Designated
at
fair value
Available
-for-sale
i income = Market ra
FinQuiz
5. Downstream Transactions
Investors share of Associates
reported NI (% of Ownership Interest
Reported NI)
Less: Amort of excess PP
Less: Unrealized profit (% of
Ownership Interest Profit from the
downstream sale in Associates NI)
= Equity Income
FinQuiz
Formula Sheet
EPSt= reported/actual EPS for quarter
t
E(EPSt) = expected EPS for the
quarter
Percent Earning Surprise =
R;<0y09 S<y9
RO3 RS
Scaled Earnings Surprise =
R;<0y09 S<y9
S. 4m ;0;P99- ;<0y09 m4<3;9
Level II 2017
=NOPAT T
FinQuiz
Formula Sheet
TEMPORAL METHOD:
FC
strengthens
relative to
parents
presentation
currency
FC weakens
relative to
parents
presentation
currency
Net Monetary
Liability Exposure
Rev
Assets
Liabilities
Net Monetary
Asset Exposure
Rev
Asset
FinQuiz
Formula Sheet
Payout Policies:
7. Stable Div. Policy
Expected in Div. = in Earnings
Target payout ratio Adj. factor
Adj. factor = 1/no. of yrs. over which
adj. in div. will take place
Expected Div = Last div. + (Expected
in earnings Target pa
FinQuiz
NAVPS = Net asset value / # of shares
outstanding
Formula Sheet
5. P/FFO = Current stock prices / Yr-ahead
estimated FFO
FFO = Net earnings + Dep. Exp. on
R.E + Deferred tax charges g/l from
sales of property and debt
restructuring + Loss
FinQuiz
Formula Sheet
23. Valuation in an international context when
land and building are valued separately:
Income to the building = NOI
assumed land lease payment
PV for building = Income to the
building / Cap rate or discount rate
Total value