FinQuiz
Formula Sheet
19. Premium Payback Period =
;<T 405<9y40 <y < 9;<
;54<; 034 ymm<0y; < 9;<
20. Favorable Income Differential per share =
440 y0<9+ V .943T y5.< 9;<
V
21. Premium over
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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 R
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Formula Sheet
where,
V
\1 1<
V=D+E=
0<9 ;P09 40
MVA =
Total value of Co. = NPV (PV of RI)
+ Original Equity investment +
Original Debt investment
Reading 23: Dividends & Shar
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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
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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-cou
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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. Li
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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 (includ
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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)
=
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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 forecas
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+ % 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
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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:
( " Ac
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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
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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
a
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Formula Sheet
TEMPORAL METHOD:
FC
strengthens
relative to
parents
presentation
currency
FC weakens
relative to
parents
presentation
currency
Net Monetary
Liability Exposure
Rev
Assets
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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
Expe
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Add: Share premium
Less: Treasury shares
Add: Consolidated reserves+Net profit
to co. owners
Plus: Translation reserve
+/-: Profit or loss recorded in equity
= Equity attributable to
sharehold
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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
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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 t