Formula Sheet

Divt+1 t *(1+g2)=Div0*(1+g1)^t*(1+g2)

Chapter4:
Market Capitalization= number of
shares*share price
P/E ratio= Price/Earnings

Projected Earnings

EPS= number of shares outstanding

Dividend yield= Div1/P0

Chapter5:

Going Concern-value=Actual Value Book

value

Book rate of return: = book Income/book

assets

= Actual Value Liquidation

value
Expected return= r =

Di v 1+ P 1P 0
P0

1+ P 1
Price or Intrinsic Value = P0=
1+ r
Zero-Growth DDM: P0=Div1/r
Constant Growth DDM: P0=Div1/(r-g)
Differential DDM:P0=

t +1
( 1+g 1 )
1
rg 2
1
+
t
rg 1
( 1+r )
(1+ r )t
t

Required rate of return: r= (Div1/P0) +g

Payout rate: =Div/Earnings

Equivalent Annual Annuity (cost): =

PV
1
1

r r( 1+r )t
Payback period:PBP=

year before recovery +

Profitability Index: PI=NPV/Investment

Weighted avg PI: WAPI=

Growth rate: g= return on equity * plowback

rate
PVGO: P0= (EPS/r) +PVGO
Such that: EPS: Earnings per share
PVGO: present value of Growth
Opportunities

Return on equity: =EPS/book equity per

share

1
2
Divh+ Ph
+
+ .+
2
P0= 1+r ( 1+ r )
( 1+r )h
Divt t 1 *(1+g1)

CF 1PI 1
+
budget

CF 2PI 2

budget
Chapter 6:
Working Capital: =Current Assets- Current
Liabilities

Plowback rate: = 1- Payout rate

= (Earnings-Div)/Earnings

Uncovered CF
CF of the year

= inventory+ accreceivaccpayabale
Straight line depreciation: =

Historical cost Salvage Value

number of years
After-Tax salvage value: = MV-(MV-BV)*tax
rate
Accounting Income= Cash inflowdepreciation
Income= Revenue- COGS
Cash paid out= accincom- Invest in InventoInvest in Rece

Formula Sheet
Net Cashflow=cashflow from capital Invest+
cashflow from changes in Working cap+
operating cash flow
Pretax profit=Revenues- Costs-Depreciation
Operating Cash Flow= Revenue - Cash
ExpensesT axes
Operating cash Flow= After-tax profit +
Depreciation
After-tax profit= Pretax profit*(1-Tax rate)

1+nominalrate

Inflation: (1+real rate) = 1+inflationrate

Modified accelerated (depreciation

MACRS) =Cost*rate
Other:

1( 1+ r )n
r
Present value annuity=
)
CF
Future value annuity=C

(1+i )t 1
i