Exam Formula Sheet

Exam 1 Formula Sheet Chapters 1-6: These WILL be provided on exam 1 and the final exam
Operating Cash Flow = EBIT – Taxes + Depreciation

CapEx = ΔNFA + Depreciation NWC = CA – CL
Average effective tax rate = tax expense / taxable income
‘Net Debt’ = Debt – Cash
Book Equity = A – L Market Cap = n * P
EPS = Net Income / n PE = P / EPS
Book Value per Share = Book Equity / n Market-to-Book = P / Book Value per Share
Price to Sales = Market Cap / Sales
ROE = NI / Book Equity = Market-to-Book ÷ PE ROA = NI / Assets
Profit Margin = NI / Sales
Asset Turnover = Sales / Assets Capital Intensity = Assets / Sales
Interest Coverage ‘TIE’ = EBIT / Interest
Total Debt Ratio = (Assets – BookEquity) / Assets
Leverage = Liabilities / BookEquity Equity Multiplier = A/E = 1 + L/E
Current Ratio = CA/CL
Retention ratio = b = Addition to Retained Earnings / NI
Internal Growth Rate  ROA  b
1 - ROA  b
Sustainable Growth Rate  ROE  b Implied Retention Ratio b = g / [ROE * (1 + g)]
1 - ROE  b
PV = V0 = CFT / (1+r)T FV = PV * (1+r)T r = (FV/PV)1/T – 1 T = ln(FV/PV) / ln(1+r)
m
PV 
PMT
APR  m (1  EAR) m - 1
1  APR 
EAR  1  1
r   m 
Fisher: Nominal Rate ≈ Real Rate + Expected Inflation Rate
Exact: (1 + Nominal) = (1 + Real) * (1 + Expected Inflation)
Final Exam Formula Sheet Chapters 16-18 &24: These WILL be provided on the final exam
Cash & Mkt Secs = – Accts Receivable – Inventory + Accts Payable + ST Debt
– LT Fixed Assets + LT Debt + Equity
Inventory TurnOver = COGS / Avg Inv Inventory period = 365 / Inv TO
Accounts Receivable TurnOver = Sales / Avg AR Receivables period = 365 / AR TO
Accounts Payable TurnOver = COGS / Avg AP Payables period = 365 / AP TO
Operating Cycle = Inventory period + Receivables period
Cash Cycle = Operating Cycle – Accounts Payable period
Q/2 = Average inventory T/Q = Orders per year
Carrying Costs = C (Q/2) Restocking Costs = F (T/Q)
Total Costs = C (Q/2) + F (T/Q) 2TF
EOQ * 
C
Float = available balance at bank – book balance
For credit terms 2/10 net 45, EAR = [1 + .02/(1–.02)]365/(45–10) – 1
Interest Rate Parity FFC per USD 1  rFC

  1  rFC  rUSD
S FC per USD 1  rUSD
Call Payoff at expiration T = max[ST–K,0]
Current Intrinsic value of call = max[S0–K,0]
Exam 2 Formula Sheet Chapters 7-12: These WILL be provided on exam 2 and the final exam
D1  P1 D1 D P D1 D2 D3 D Constant P  D1/m
P0  P0   2 22 P0    
1  r  1  r  1  r  1  r  1  r  1  r 
2 3
1  r  Dividends 0 r/m
Average Net Income
AAR 
Average Book Value
CF1 CF2 CF3 CFT
0  CF0    
1  IRR  1  IRR  1  IRR 
2 3
1  IRR T
NPV  Initial Investment NPV  CF0
PI  
Initial Investment  CF0
Operating Cash Flow = EBIT + Depr – Taxes = (Sales – Costs)(1 – T) + Depr*T
CapEx = ΔNFA + Depr After-tax Salvage = SalePrice – T*(SalePrice – Book)
rt+1 = (Dt+1 + Pt+1 – Pt) / Pt Dividend Yield = Dt+1 / Pt Capital Gains Yield = (Pt+1 – Pt) / Pt
Geometric Return = [(1+r1)(1+r2)∙∙∙(1+rT)]1/T – 1
Average Return = (r1+r2+∙∙∙+rT) / T
Variance = sum of squared deviations from average / (T–1)
Standard Deviation = square root of Variance = Volatility
Geometric average ≈ arithmetic average – ½ volatility2
Historical Risk Premium = Average Return – Average T-Bill Return
E[r] = p1 r1 + p2 r2 + …+ pn rn
Variance σ2 = p1(r1 – E[r1])2 + p2(r2 – E[r2])2 + …+ pn(rn – E[rn])2
Standard Deviation or Volatility σ = √Variance
rP = wA rA + wB rB +…+ wZ rZ
E[rP] = wA E[rA] + wB E[rB] +…+ wZ E[rZ]
σP < wA σA + wB σB +…+ wZ σZ
r = E[r] + m + ε
Total risk = Systematic risk + Unsystematic risk
σ σ
β i  ρiM i  iM
σ M σ 2M
βP = wA βA + wB βB +…+ wZ βZ
Risk premium = E[ri] – rF
Cost of debt rD ≤ Yield to Maturity After-tax cost of debt = rD (1 – TC) D = market value of debt
Cost of preferred rP = D1 / P0 Pfd = market value of preferred = number outstanding * price
Cost of equity: use DGM and/or CAPM
E = market value of common = number outstanding * current price
Market value of the firm V = D + Pfd + E
Final Exam Formula Sheet Chapters 13-15: These WILL be provided on the final exam
For only Debt and Equity (no Preferred):

No taxes: MM 1: V = D + E MM 2 : rE  rA  (rA  rD ) DE
With taxes: PV(Debt Tax Shields) = TC * Debt VL = VU + TC*D E = VL – D
Pex ≈ P – Cash Dividend

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Exam 1 Formula Sheet Chapters 1-6: These WILL be provided on exam 1 and the final exam

Operating Cash Flow = EBIT – Taxes + Depreciation

Interest Rate Parity FFC per USD 1  rFC

For only Debt and Equity (no Preferred):

Pex ≈ P – Cash Dividend

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