finance 3000 formulas

RFR+B(MR-RFR)

cost of equity =

CAPM

method to use for cost of equity

CAPM

if you see beta + market return use

ann pref div/market price

component cost of pref stock=

divide dividend by price

if you see preferred + percent of par

MV equity/Total MV

(WACC market value) weight of equity=

common stock shares x price

MV Equity =

preferred stock shares x price

MV Preffered =

bonds x percent of par x 1000

MV debt =

(weight of equity x cost of equity) + (weight of debt x cost of debt x (1 - tax rate))

WACC =

(next div/stock price - (flot cost x stock price)) + growth rate

flotation adjusted COE =

Beta

project risk also means

Tbill rate + (Beta x MRP)

CAPM required return =

cost of debt

YTM is also

Sale Price + (Loss x Tax Rate)

After-tax CF from loss =

Sale Price - (Gain x Tax Rate)

After-tax CF from gain =

tax is applied

if sale price does not equal book value

(cost-final book value)/useful life

annual depreciation =

annual deprecation x tax rate → CPT PV ord ann

PV of depreciation tax shield

Baumol Cash Model

optimal cash replenishment level signals

sq rt((2*annual cash demand*cost)/interest rate)

Baumol Cash Model/optimal cash replenishment level

is

if loan without balance costs MORE, compensating balance __ worth it

is not

if loan with balance costs MORE, compensating balance __ worth it

(end inventory * 365)/COGS

What is the length of the days' sales in inventory? formula

(inventory * 365)/COGS

days sale inventory =

(acc receivable*365)/credit sales

average collection period =

days sale in inventory + average collection period

operating cycle =

operating cycle - average payment period

cash cycle =

(accounts payable * 365)/COGS

average payment period =

that piece/total firm value

weight (equity or debt) =

need more debt

if target D/E > current D/E

need more equity

if target D/E < current D/E

EBIT - interest

if no taxes, net income =

net income/shares

EPS =

net income/total assets

old ROE =

debt x interest rate

interest expense =

total dividends/net income

firms payout ratio =

COE - RFR

(in relation to RFR) market risk premium =

selling price - book value

figure out if there is a gain or loss

equipment cost - ending book value

total depreciable amount =

gain/loss(1-tax rate)

after-tax CF: tax adustment

EBIT * (1-tax)

old net income =

old net income/equity

old ROE =

(EBIT - interest)(1 - tax)

new net income =

new net income/new equity

new ROE =

CS + APIC

stock divs: total market value =

old shares/split amount

stock split: new shares =

old price x split amount

stock split: new price

operating cycle - cash cycle

average payment period =

365 / app

payables turnover =

DSI + ACP

operating cycle =

NPV

if the problem says mutually exclusive look at (NPV/IRR)

OCF - NWC

FCF =

cash flow/(1+COC)^t

discounted cash flow in year t =

NPV/initial cost

solve for PI w CFs=

accept

if IRR > required return

reject

if IRR < required return

current assets - current liabilities

NWC =

discount rate

cost of capital is also