IB essential formulas

Key Valuation Formula

Company Value = Cash Flow/ (Discount Rate - CF Growth Rate)

Unlevered FCF

Unlevered FCF =( EBIT * (1- Tax Rate)) + D&A - CapEx - Change in NWC

WACC

WACC= (cost of equity % of equity) + (cost of debt % of debt) + (cost of preferred * % of preferred)

Capital Asset Pricing Model (CAPM)

Cost of Equity = Risk-free rate of return + beta * (market rate of return - risk-free rate)

Cost of Debt

Cost of Debt = (Interest Expense/ Total debt)*100

Levered FCF

Levered FCF = CF from Operating Activities - CapEx - Mandatory debt payments

Present Value

PV= Future Amount / (1+ r)^n

Working Capital

Working Capital = Non-cash current assets - Non-cash current liabilities

Net Income to Common

Net Income to Common = Net Income - Preferred Dividends

P/E

Equity Value / Net Income

Terminal Value

Terminal Value = (Final Year FCF * (1+ perpetuity growth rate)) / WACC - perpetuity growth rate