Flashcards in Becker Deck (67)
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0
Compute calculation of net cash outflow at beginning of 1st year
Initial investment
+shipping
+installation
+training
+increase in working capital
-cash proceeds on sale of old (net of tax)
=net initial outflow
1
Calculation for economic value added
Cost of investment x capital=required return
Income after required economic taxes - return=value added
2
Calculation for expected cost savings
1)budgeted cost of sales/current inventory turnover=current average inventory
2)budgeted cost of sales/expected inventory turnover=expected average inventory
3)current average inventory - expected average inventory=inventory increase/decrease
4)inventory increased/decrease x interest rate=cost savings
3
Calculation for margin of safety percentage
Margin of safety in dollars/total sales
4
Calculation for margin of safety (in dollars)
Total sales (in dollars) - break even sales ( in dollars)
5
Formulas for return on investment
Income/investment capital
Or
Profit margin x investment turnover
6
Calculation for APR of quick payment discount
Disc % x 365/(100-disc%) x (pay period-disc period)
7
Overhead variances
Actual vs. Budget on actual hours
Budget on actual hours vs. Budget on standard hours
Budget on standard hours vs. Overhead applied
8
What are the 4 strategic business units?
Cost
Revenue
Profit
Investment
9
What are the 4 designs for financial scorecards
"AT US"
Accurate, timely, understandable, specific accountability
10
Calculation for market size variance
Actual market size - Expected market size x budgeted marketed share% x budgeted CM (weighted average)
11
Calculation for sales price variance
(Actual SP/Unit - Budgeted SP/Unit) x actual sold units
12
Calculation for sales volume variance
Actual sold units - Budgeted sales x CM
13
Calculation for profit margin?
Investment turnover?
Income/sales
Sales/invested capital
14
Formula for bond yield plus risk premium (BYRP) for cost of retained earnings
KDT(pretax cost of long-term debt) + PMR(risk premium)
15
Formula for cost of retained earnings
kre=krf + [bi x (km - krf)]
krf=risk free rate
Bi=beta
Km=market rate
Krf=risk free rate
16
What are the formula notations for the following
Risk free rate?
Risk premium?
Krf
Stocks beta coefficient ( bi) x the market risk premium (PMR)
17
What are the 3 methods of computing cost of retained earnings (kre)
Capital asset pricing model
Discounted cash flow
Bond yield plus risk premium
18
Calculation for return on assets
Net income / average total assets
19
Formula for dividend per share expected at the end of one year: D1
D0 x (1+g)
Annual stock dividend
20
Formula for cost of retained earnings using discounted cash flow
(Div1 / P0) + g
Div1=dividend per share expected at end
P0=current market value or price of common stocks
G=constant rate of growth
21
Formula for cost of preferred stock
Preferred stock cash dividends / net proceeds of preferred stocks
22
What letters express
Cost of preferred stock?
Net proceeds of preferred stocks?
Preferred stock cash dividend?
Kps
Nps
Dps
23
What letters express
Cost of long-term debt?
Pre-tax cost of debts?
After-tax cost of debt?
Kdx
Kdt
Kids
24
Formula for weighted average interest rate
Effective annual interest payments / debt cash available
25
Formula for weighted average cost of capital
Cost of equity multiplied by the percentage equity in capital structure + weighted average cost of debt multiplied by the percentage debt in capital structure
26
Formula for degree of combined leverage
% change in EPS / % change in sales
Or
DOL x DFL
27
Formula for degree of financial leverage
% change in EPS / % change in EBIT
28
Formula for degree of operating leverage (DOL)
% change in EBIT / % change in sales
29
