IBA Technical Exam - Equations

P/E Ratio

price per share/earnings per share

unlevered free cash flow

EBIT * (1 -tax rate) + non-cash adjustments and changed in working capital - capex

diluted equity value

diluted share count * current share price

company value

cash flow / (discount rate - cash flow rate)

current equity value

shares outstanding * current share price

enterprise value

equity value + debt + non-controlling interest + preferred stock - cash

equity value

enterprise value + cash - debt - preferred stock - non-controlling interest

EBIT

revenue - COGS - operating expenses

levered free cash flow

(EBIT - net interest expense) * (1 - tax rate) + non-cash charges and change in working capital - capex - mandatory debt repayments

terminal value

(final year FCF * (1 + terminal growth rate)) / (discount rate - terminal growth rate)

cost of equity

risk free rate + equity risk premium * levered beta

unlevered beta

levered beta / ( 1 + (total debt/ equity) * (1 - tax rate))

levered beta

unlevered beta * (1 + (1- tax rate) * (total debt / equity))

WACC

(cost of equity * % of equity) + (cost of debt * % of debt * (1 - tax rate)) + (cost of preferred stock * % of preferred stock)

implied share price

implied equity value / company's diluted share count

trailing twelve months

most recent fiscal year + new partial period - old partial period

IRR

((exit proceeds / investor equity) ^ (1 / # of years)) - 1

LBO equation

((EBITDA * exit multiple) - debt) / equity = MoM

current ratio

current assets / current liabilities

measures a companies ability to fulfill short term obligations

leverage ratio

total debt / EBITDA

measures a business financial leverage in terms of assets, liabilities, and equity

cost of debt

pretax: annual interest expense / total debt

post tax: pretax * (1 - tax rate)

preferred stock

preferred divided / preferred share price

perpetuity of terminal year

FCF * (1 + perpetuity growth rate) / (WACC - perpetuity growth rate)

terminal value using the WACC

(1/ 1 + WACC) ^number of years