Finance Final Exam Equations

Net Capital Spending

=change in NFA + deprecation

Change in net working capital

= (CA end - CL end) - (CA beg - CL beg)

Net Working Capital

CA-CL

Cash Flow from Assets

= OCF - net capital spending - change in NWC

or

= cash flow to creditors + cashflow to stockholders

Cash Flow to Creditors

Interest Paid - (long term debt end - long term debt beg)

Cash flow to shareholders

= dividends paid - net new equity raised

= (Net Income - (RE end - RE beg)) - (Common stock end - common stock beg)

dividends paid

= (Net Income - (RE end - RE beg))

Net New Equity Raised

= (Common stock end - common stock beg)

Reconciling the Balance Sheet

= Cash flow from assets - cash flow to creditors - cash flow to stockholders = zero

AFN

=change in asset accounts - change in current liability accounts - change in retained earnings accounts

A *

full capacity = total assets

not at full capacity = total current assets

S0

Current Sales

Delta S

Curent sales * Sales Growth

L*

Total Current Liabilities - np

M

= Net income/ Sales

S1

= Current Sales * (1 + Sales Growth)

RR

= change in retained earnings/net income

or

= (1-dividends/net income)

Depreciation Basis

= Price of Asset + Associated Costs (Delivery, Installation, Set-up, Initial Training costs etc)

Book Value

= depreciation basis - accumulated depreciation

Capital Gain

Salvage value - book value

Tax due

= capital gain * tax rate

Capital loss

Book Value - Salvage Value

Tax Refund

= capital loss * tax rate

NICO

= price of assets - start up costs - change in net working capital

terminal cash flow

= +salvage value of assets +/- salvage value tax consequences + change in nbc

salvage value tax consequences

= salvage value * tax rate

Incremental net revenues

= net revenues - opportunity cost ± side effects

Operating cash flow

incremental net revenues - deprecation = taxable basis - taxes (taxable basis x tax rate) + depreciation

profitability index

PV of future cash flows/PV of initial Investments

annual coupon payment

= coupon rate * face value (pv)

YTM

discount rate

semi-annual coupon pmt

= coupon rate*face value/2

semi-annual interest rate

= YTM/2

Current Yield

=annual coupon payment/market price

Net New Borrowing

long term debt end - long term debt beginning