Corp Finance

Question 1

Profit Index PI

Answer 1

PI = 1+Npv/initial investment

Money recieved for 1$ invested

Question 2

Sustainable growth rate

Answer 2

G= (1-D/EPS) ROE

Or 1-ERP / ROE

Question 3

ßasst she

Answer 3

ßasst = ßdWd + ßeqWeq

Wd has a tax x(1-t)

Question 4

Unlevered ß

Answer 4

ß unlevered is a ß before pmt of debt

Hamada equation = ßunlevered = ßeq[1/(1+(1-t) x D/E)]

Question 5

Levered ß

Answer 5

After tax pmt

ßl = ßu (1+(1-t)D/E)

Question 6

DOL degree of oper leverage

Answer 6

DOL = %change Oper Inc / %change quantity

Or DOL = (Contr marg x Q) / ((Contr marg x Q) - FC)

Question 7

DFO degree of fin leverage

Answer 7

Change in oper inc / change in net inc

Or

(Contr marg - FC) / (Cm - Fc - C)

Question 8

Bank acct

Answer 8

Bank acct = int / (loan amt- int)

Question 9

Economic order point

Answer 9

EOC= [(2x usage x order cost)/(carry cost)]^1/2

Question 10

AP implicit rate

Answer 10

[1+disc/(1-disc)] -1

Question 11

LOC

Answer 11

(Int + comis + fee)/ loan amt

Question 12

Commercial paper

Answer 12

(Int + dealer’s commis + backup cost)/ loan amt - int