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    Equation Formula: 1 1 FV PMT 1

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    JMSB09
    The document contains formulas for calculating financial metrics such as present value, future value, internal rate of return, net present value, weighted average cost of capital, dividend discount model, bond valuation, beta, and capital asset pricing model. It includes formulas for ordinary annuities, perpetuities, growing annuities, effective interest rates, portfolio returns, and cash flows for net present value calculations.

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    Equation Formula: 1 1 FV PMT 1

    Uploaded by

    JMSB09
    66 views3 pages
    The document contains formulas for calculating financial metrics such as present value, future value, internal rate of return, net present value, weighted average cost of capital, dividend discount model, bond valuation, beta, and capital asset pricing model. It includes formulas for ordinary annuities, perpetuities, growing annuities, effective interest rates, portfolio returns, and cash flows for net present value calculations.

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    4

    Original Title

    Formula Sheet

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    The document contains formulas for calculating financial metrics such as present value, future value, internal rate of return, net present value, weighted average cost of capital, dividend discount model, bond valuation, beta, and capital asset pricing model. It includes formulas for ordinary annuities, perpetuities, growing annuities, effective interest rates, portfolio returns, and cash flows for net present value calculations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    66 views3 pages

    Equation Formula: 1 1 FV PMT 1

    Uploaded by

    JMSB09
    The document contains formulas for calculating financial metrics such as present value, future value, internal rate of return, net present value, weighted average cost of capital, dividend discount model, bond valuation, beta, and capital asset pricing model. It includes formulas for ordinary annuities, perpetuities, growing annuities, effective interest rates, portfolio returns, and cash flows for net present value calculations.

    Copyright:

    © All Rights Reserved
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    of 3

    Equation Formula

    Present Value FV 1
    PV FV
    1 k 1

    Future Value (Ordinary Annuity) 1 k 1


    PMT

    Present Value (Ordinary Annuity)


    PMT  1 
    PV0 = 1  
    k  1  k n 

    Future Value (Annuity Due)


     1  k n  1 
    FVn = PMT   1  k 
     k 

    Present Value (Annuity Due)


    PMT  1 
    PV0 = 1   1  k 
    k  1  k n 

    Present Value (Perpetuity)


    PMT
    PV0 
    k
    Growing Perpetuity
    PMT0 1  g  PMT1
    PV0  
    kg kg

    Growing annuity
    PMT1   1  g  
    n

    PV0   1    
    k  g   1  k  

    Effective Annual Rate m


     QR 
    k  1   1
     m 
    Effective Period Rate (for any period f) m
     QR  f
    k  1   1
     m 
    Bond Valuation
    I  1  F
    PV0 = 1  n 

     1  kb   1  kb 
    n
    kb

    Fisher Relationship RF = [ (1 + Real rate)(1 + Expected inflation) ] – 1


    Market Price of Preferred Shares
    Dp
    Pps 
    kp

    1 
     
    Constant Growth Dividend Discount Model
    D0 1  g  D1
    P0  
    kc  g kc  g
    Sustainable Growth Rate g =b × ROE
    P/E Ratio Approach P0 = Estimated EPS1 × Justified P/E ratio = EPS1 ×
    P0/E1
    P/E Ratio (Using Constant Growth DDM)
    P0 P D / EPS1
      1
    EPS1 E kc  g
    Total Return Total return  Income yield + Capital gain (or loss) yield
    CF  P  P
     1 1 0
    P0

    Expected Return (Individual) n


    ER    r1  Probi 
    i 1

    Standard Deviation for Individual Returns Ex-Post


     
    n 2
     ri  r
    Ex post   i 1

    n 1
    Standard Deviation for Individual Returns Ex n
    Ante
      Prob  r  ER 
    2
    Ex ante   i i
    i 1

    Expected Portfolio Return


    w ∗ ER

    Standard Deviation of a Two-Security Portfolio


    2
    (Using Covariance)

    Covariance of Returns
      
    n
    COVAB   Probi rA,i  r A rB ,i  r B
    i 1

    Covariance of Returns (Using Correlation COVAB = ρAB σA σB


    Coefficient)
    Sharpe Ratio ER p  RF
    Sharpe ratio 
    p

    Beta COVi,M  i,M i


    i  
     M2 M

    Portfolio Beta  p  w11  w2  2  ...  wn  n

    2 
     
    CAPM ki  RF   ER M  RF  i

    Alpha αi = (Ri − RF) − [βi(RM − RF)]

    Net Present Value


    NPV
    1

    Profitability Index PV cash inflows


    PI
    PV cash outflows
    Initial Cash Outlay CF0 = C0 + ΔNWC0 + OC
    Annual After-Tax Cash Flows CFt = CFBTt (1 − Τ) + CCAt (T)
    Ending Cash Flow (ignoring tax implications) ECFn = SVn + ΔNWCn

    Net Present Value NPV = PV(Annual CFs) + PV(ECFn) − CF0


    WACC with Preferred Shares
    S P D
    WACC  K e  K p  Ki
    V V V

    3 
     

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