financial Management 2

What is the formula that used to find compounded bonds price

PMT/ (1 + Coupon rate / pmt per year)^t

What formula would you use to calculate change in stock price from change in free cash flow

(old FCF / 1 + wacc) - ( new FCF / 1 + wacc) = change in company value

change in stock price = change in company value/ # of share outstanding

what does incremental Earnings mean

The amount by which the firm's earnings are expected. to change as a result of the investment decision.

what formula should you use when calculating incremental Earnings

Incremental Earnings = ( revenues - cost - cca) x (1 - tax rate)

Finding Net Working Capital

NCW = cash + A/R + Inventory - A/P

What is Net Working Capital

the difference between a company's current assets and current liabilities on its balance sheet.

Finding Free cash Flow

Incremental Earnings + CCA - capital Expenditures - change in NWC

Weighted Average Expected Return

= (p1 + D1 - P0) / P0

Var for two stocks (weight and correlation)

(w1)²(SD1)² + (w2)²(SD2)² + 2(w1)(SD1)(w2)(SD2)(C)

w = weight

c = correlation

Calculating Expected Return ( beta )

= risk free return + Beta x risk premuim

= risk premium = ( Rm - Rf)

Rf = Risk Free Return