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Flashcards in Formulas Deck (27):
1

Present value of an Annuity

Either:

PV = C x (1/r - 1/r x (1+r)^t )

Or PV= c x annuity factor

C = cash flow

R = interest rate

T= time

2

Future Value (FV)

FV = PV x (1+r)^t

3

Present value with annual compounding

PV = FV / (1+R)^t

4

Using discount factor

PV = FV x discount factor

5

Using annuity

PV= C x annuity factor

6

Annuity due

C x (1/r - 1/r x (1+r)^t ) x (1+r)^t

7

Present value today

PV = FV/ (1+r)^t

8

Future value of annuity

PV annuity x (1+r)^t

9

Effective interest rate

Effective interest rate = (1 + r/n) ^n -1

10

NPV of project

NPV of project = CF0 + CF x annuity factor

CF0 = initial investment

CF = cash flow

11

Profitability index

Profitability index = NPV / initial investment

12

NPV of year t today

NPV of year t today = NPVt / (1+r)^t

13

Pre tax profit

Pre tax profit = earnings - depreciation

14

Taxes

Taxes = tax rate x pre tax profit

15

Profit after tax

Profit after tax = pre tax profit - taxes

16

Operating cash flow

Operating cash flow = profit after tax + depreciation

17

Net cash flow

Net cash flow = ( rev- expenses) x (1- tax rate) + (tax rate x dep) + (additional investment in working capital, if pos minus it, if neg add it )

18

WACC(opportunity cost of capital)

WACC = ((equity / equity + debt) x Te) + (debt / debt + equity) x Td x (1 - Tr))

19

PV of growing perpuity or value of firm

PV of growing perpuity or value of firm = PV = c / r - g

Or annual free cash flow / WACC - constant rate

20

Underwriting spread

Underwriting spread = offered shares price - underwriter share

21

Subscription price

Subscription price = how much they need to raise / how many they’re offering

22

Value of merged firm

Value of merged firm = value of acquiring + value of target + economic gains

23

Value of acquiring / value of firm

Value of acquiring / value of firm = price per share x no. Of shares

24

Value of target

Value of target = shares outstanding x share price

25

Earnings of merged firms

Earnings of merged firms = earning of acquiring + earnings of target

26

Mm prop 1 - for when there are no taxes and you’re working out WACC

R assets = r debt x D/+E + r assets x E/D+E

27

For equation for mm proposition 2 for when restructuring

R equity = r assets (WACC) + D/E (r assets - r debt)