E Formulas Flashcards
(15 cards)
Theoretical ex-rights price?
(pre-existing value of equity + proceeds of rights issue + project NPV) / Number of shares after the rights issue
Ex-div market value at time 0
Present value of the future dividends discounted at the shareholder’s required rate of return
Annual interest
Coupon rate × nominal value
Irredeemable loan notes ex-interest market price?
Annual interest payment / Bondholders’ required return
if debt is irredeemable, what is the cost of debt to the company?
Debtholders’ required return × (1 − corporate tax rate as a decimal)
Effective annual cost of debt?
(1 + semi-annual cost)^2 -1
What is the post-tax cost of bank loans?
Quoted interest rate × (1 − corporation tax rate).
Value of geared company?
Value of equity + Value of debt
CAPM formula?
Risk-free return + (beta of the investment * (expected return from the market portfolio - risk-free return))
Debt to equity?
((Non-current liabilities)/Capital + reserves) * 100
Debt to total capital?
((Non-current liabilities)/Capital Employed) * 100
Operating gearing (costs)?
(Fixed operating costs / Total operating costs) * 100
Operating gearing (profit)?
Contribution / Operating profit
Interest coverage
Operating profit / Interest expense
Cash flow coverage
(Cash from operating activities + income taxes paid) / Interest expense
