Fin700 Final Exam Formula Sheet – T318

(Ending Price- Begining Price )+D1 D 0× (1+ g ) D1

Percentage Return= P0 = =
Begining Price ( R E− g ) ( R E− g )
(Change in market value )+Dividends paid at end of period t
¿ D t =D 0 ×( 1+ g )
Begining market value
(1 + R) = (1 + r) × (1 + h) D1
R E= +g
P0
R≈r +h
1 I + ( PV − NP ) /n
R D=
Var ( R ) =
T−1 [
× ( R1 − R )2 +. .. .+ ( R T − R ) 2 ] ( PV + NP ) /2

T D
E( R )=∑ pi ×R i R P=
t =1
P0
T
V=E+D
Variance=∑ pi ( Ri −R ) 2
t =1
WACC = ( E V )× R +( D V )× R
E D× (1 − TC )

Standard Deviation =√ Variance

E D
f A= ×f E + ×f D
E ( R P )= ∑ w j E ( R j ) V V
j=1

Variance P =σ 2p =( w1 ×σ 1 )2 + ( w2 ×σ 2 )2 +2×w1 ×w 2 ×Cov 1,2 True cost of project

Project cost (ignoring flotation costs )
√ 2
SD P =σ p = ( w 1×σ 1 ) + ( w2 ×σ 2 ) +2×w 1×w2 ×Cov 1,2
2
=
( 1 −f A )
Cov ( Ri ,R M )
ρiM = RE = RA + (RA – RD) × (D/E)
σ i ×σ M

R = E(R) + U RE = RU + (RU – RD) × (D/E) × (1 – TC)

E ( R i )− Rf
Reward/risk ratio =
βi RA = Rf + (RM  Rf)βA

CAPM = E ( Ri )=R f + [ E ( R M − R f ) ]× βi βE = βA(1 + D/E)

CAPM = R E =Rf + β E ×( R M − R f )
Vu = [EBIT (1 – TC)] / RE
Cov ( Ri ,R M )
β i= 2 VL = VU + TCD
σM
T
C1 = 0 if ( S1 − E )≤ 0
β P =∑ wi × β i
t =1
C1 = S1 − E if ( S1 − E ) > 0
[
CML = E ( R p )= R f + ( E ( R M ) − R f ) /σ M × σ p ]
SML = E ( Ri ) = R f + [ E ( R M − R f ) ] × βi
Call option value
T
Ct =Share price − PV of exercise price
NPV=−C0 + ∑
t =1 ( 1+r )t
C C0 = S0 − E/ ( 1+ R f )t
PerpetuityPV 0 = 1
r
Yield to maturity (y) for a t-year bond using
successive one-year forward rates =
y = [{(1+0r1)(1+1r2)(1+2r3)..(1+t-1rt)}^(1/t)] - 1