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20 Terms
TVM calculated using (eq for FV)
FV = PV (1 + i/n ) nt
where i is the interest rate or discount rate,
n is the no. of compounding periods of interest per year,
t is the no. of years.
EAR equation
(1 + r/m)m - 1
where r is interest rate, m is the no. of compounding periods per year.
Growing Annuity PV equation
PV = R/r - g [ 1 - (1 + g /1 + r)n
where R is the initial cash flow,
n is the time that the annuity lasts,
g is the growth rate.
Growing Annuity FV equation
PV = R/r - g [(1 + r)n - (1 + g)n]
where R is the initial cash flow,
n is the time that the annuity lasts,
g is the growth rate.
Ordinary Perpetuity PV eqn
PV = [R / (1 + r)] + [R / (1 + r)2] + …
Growing Perpetuity PV eqn
PV = PV = [R / (1 + r)] + [R(1 + g) / (1 + r)2] + …[R(1 + g)2 / (1 + r)3] + …
Fisher eqn
1 + rnom = (1 + rreal) . (1 + i)
EAC eqn in terms of NPV
EAC = NPV / An,r
EAC eqn in terms of words
EAC = Asset Price . Discount Rate / 1 - (1 + Discount Rate)-n + Annual Maintenance Cost
IRR eqn
r = (R/Iout)1/n - 1
where Iout is the PV of initial investment,
R is cash inflow.
MIRR eqn
r = n√(R / PVout) - 1
where R is the FV of all positive cash inflows, PVout is the PV of all negative cash inflows.
Horizontal Analysis eqn
H.A. (%) = (Vn - Vn-1/Vn-1) x100
where Vn is the values in period n.
WACC eqn
RE.WE + RD.WD
where RE is the cost of equity,
WE is the proportion of equity finance to the total finance,
RD is the cost of debt,
WD is the proportion of debt finance to the total finance.
RPS eqn
Preferred stock dividend per share (D0) / Current price of preferred stock (P0)
terms in given Cost of Equity Capital eqn
rf is the risk-free rate of return,
β is the risk of the asset,
rm is the return of the market.
Bond Price
[Coupon 1 / (1 + YTM)1] + [Coupon 2 / (1 + YTM)2] + ….. + [Coupon N / (1 + YTM)N] + Face Value / (1 + YTM)N]
Computation of New Shares eqn (nP0)
nP0 = 1 / (1 + re) [E - 1 + (n + ∆n) . P1
where P0 is the prevailing market share,
E is the total earning,
n is the no. of outstanding shares at the beginning of the year.
Retained Earnings eqn
E - nD1
E is the total earning,
n is the no. of outstanding shares at the beginning of the year,
D1 is the dividend at the end of period one.
Capital raised through new shares issued eqn
I - [E - nD1]
where I is the investment to be made at the end of the year,
E is the total earning,
n is the no. of outstanding shares at the beginning of the year,
D1 is the dividend at the end of period one.
New issue of shares at end of the year eqn (∆n)
∆n = (I - [E - nD1]) / P1
where P1 is the issue price per share,
where I is the investment to be made at the end of the year,
E is the total earning,
n is the no. of outstanding shares at the beginning of the year,
D1 is the dividend at the end of period one.