Finance Formulas

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8 Terms

1
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Marginal Cost of Debt

(Y(1-T))/ [1-(F(1-T)]

2
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CAPM Formula

=Rf+B(Rpm)

3
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Marginal Cost of PS

Dividend / Net Proceeds per share after floatation cost

Dividend = Dividend of BV

Net Proceeds after floatation cost = FMV PS x [1-(1-T)xF]

4
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Marginal Cost of CS

[Rf + B x RPm]/ [1-f]

5
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M&M F1

Vl= Vu + TD

Value of levered = Valued Unlevered plus Aftertax Debt

6
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M&M Cost of Equity (Re) (F2)

= Ru + DE [Ru-Rd] x [1-T]

Ru= Cost of Unlevered

Rd = Cost of Levered

7
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Effective Interest Rate on Trade Credit

[1+ Cash Discount / (Price less Discount)]^[365/Extra Days] -1

8
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Value of a Right (Rights Offering)

[Rights on Share Price - Sub Price ]/ Number of rights required to buy one share +1