Assumptions
Type of equation
Simple Interest & One-Period FV
FV=PV (1+i)
Compound interest; FVn over multiple years
FVn=PV0*(1+i)^n
annual compounding!
FV
annual compounding
Result
0
0
Solving for interest rate
i=(FVn)/(PV0 )^(1/n)-1
#DIV/0!
Solving for t
B383 Finance
Tues. Nov. 26. 2013.
Free Cash Flow
Free cash flow: amount of money that youd receive at the end of each year if you were the only
owner of a company that had no debt
o If the company had debt, then free cash flow = amount of money youd recei
BU383 Finance
Ch.6.
Diversification Question Types
Market risk factor is a risk that influences only a small # of companies false
Both systematic and unsystematic portions of asset matter in determining expected return
Beta = 1.5 means the stock has 50% m
B 383 Finance
Tues. Nov. 5-12. 2013
FUTURES & OPTIONS
Futures and options are derivative contracts.
Derivative = price of future/option is derived from the price (level) of an underlying asset (variable).
o Derivatives are tools that companies use to redu
Fall 2016
1
BU393 Midterm
Midterm Exam Formula Sheet
PVIFn,i
PVIFA n,i
1
1 - (1 i )- n
i
PVIFA - Duen,i
Pzero
P0
FVIFn,i (1 i )n
1
(1 i )- n
(1 i)n
FVIFA n,i
1
1 - (1 i )-n (1 i )
i
$FVn
(1 i n )n
PV Tax Shieldsn =
FVIFA - Duen,i
Pcoup $C
D0 (1 g
BU 383 Week 1 Chapter 1
Money Market
o Market for securities that mature in less than one year
o Are highly liquid
o Most investment funds and financial intermediaries hold money
market securities to meet withdrawals
o Have large face values which preclud
Midterm Exam Formula Sheet
PVIFn,i
PVIFA n,i
1
1 - (1 i )- n
i
PVIFA - Duen,i
Pzero
P0
FVIFn,i (1 i )n
1
(1 i )- n
(1 i)n
FVIFA n,i
1
1 - (1 i )- n (1 i )
i
$FVn
(1 i n )n
FVIFA - Duen,i
Pcoup $C
D 0 (1 g) D1
kg
kg
1
(1 i )n 1
i
1
(1 i )n 1 (1 i
Depreciation
& Expansion
Notes
Bu 393
1/ 15
1
Revenue
less
All Allowable Business Expenses
Capital Cost Allowance non-cash charge
Interest Charges on Debt Tax Allowed Depreciation
Earnings Before Tax cfw_ Taxable Income
2/ 15
Total Tax Payable = 38% x Tax