F Formulas

Question 1

NBV method balance sheet equation?

Answer 1

Assets - liabilities

Question 2

NRV method for estimating business’ liquidation value?

Answer 2

Estimated net realisable values of assets - liabilities

Question 3

What is the net replacement cost?

Answer 3

Estimated depreciated replacement cost of net assets

Question 4

What is P/E ratio?

Answer 4

Market price per ordinary share / Earnings per share

Question 5

What is EPS ratio?

Answer 5

(PFY - Preference dividends) / Number of issued ordinary shares

Question 6

Ordinary share price?

Answer 6

P/E ratio * EPS

Question 7

Value of company?

Answer 7

P/E ratio * (PFY - Preference dividends)

Question 8

Market value per share?

Answer 8

Recent EPS * average PE ratio

Question 9

Number of issued shares?

Answer 9

Share capital / nominal value per share

Question 10

Value of company when average price earnings ratio is given in the question?

Answer 10

Market value per share * Number of issued shares

Question 11

Earnings yield?

Answer 11

(EPS / Market price per share) * 100

Question 12

Ordinary share price?

Answer 12

EPS / Earnings yield

Question 13

Constant dividend growth?

Answer 13

(Most recent dividend * (1 + dividend growth rate)) / (Required return of equity investors - Current share price)

Question 14

Constant dividend (no growth)?

Answer 14

Current dividend / Required return on equities in this risk class

Question 15

Constant dividends for five years and then growth of 5% per year to perpetuity formula?

Answer 15

PV of five years’ dividends + PV of growing dividend from year 6 onwards

Question 16

PV of five years’ dividends?

Answer 16

Current dividend * cumulative discount factor years

Question 17

PV of growing dividend from year 6 onwards

Answer 17

(Most recent dividend * (1 + dividend growth rate)) / (Required return of equity investors - Current share price)

*

1/(1+required returns on equities in this risk class^number of years)

Question 18

Constant followed by sale in 5 years?

Answer 18

PV five years’ dividends + PV of sell price in five years’ time

Question 19

PV of sell price in five years’ time

Answer 19

Sell price * (1/(1+required returns on equities in this risk class)^5

Question 20

Value of equity in discount cash flow basis?

Answer 20

Value of assets − Value of debt

Question 21

Market capitalisation?

Answer 21

Number of issued ordinary shares × market price per share

Question 22

Market price of each preference share?

Answer 22

Annual fixed dividend / Required return

Question 23

Annual fixed dividend preference share?

Answer 23

Nominal value * % preference shares

Question 24

Market price of each loan note?

Answer 24

Annual coupon / Required return

Question 25

Annual coupon?

Answer 25

Loan note % * nominal value

Question 26

Market price of loan note?

Answer 26

PV of the coupon + PV of the redemption price

Question 27

PV of the coupon?

Answer 27

Annual coupon * Applying the "Number of years" annuity factor at "bond's yield to maturity".

Question 28

PV of the redemption price?

Answer 28

Redemption price * Applying the "Number of years" discount factor at "bond's yield to maturity