Formula Sheet-corp Finance
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1Formula Sheet, Corp Finance 1.
Y SUB a = (1 + {Y SUB nom}OVER n) Multiple Period formula for calculating SUP n - 1 annual interest rates Ynom = n * Yperiod 0.08 = 4 * 0.02 0.08 = 2 * 0.04 C OVER r 2.
Perpetuity:
3.
Growing Perpetuity:
4.
Annuity (g = 0):
5.
C OVER {r - g } (1- {(1 + Growing Annuity, which g) } ^n OVER { (1 + r) } contains all the other formulas: ^n)
C OVER {r - g }
6.
If cash flows, interest rate changes over time then:
C OVER r (1- 1 OVER { (1 + r) } ^n)
FROM {t=0} TO {n} ER_t over {(1+r)^t}
7.
Internal Rate of Return
IRR or y = r = (P / Q)1/t - 1
8.
Rate of return, 2-period world: Undiscounted sum of cash flows amount invested
r = Co + Ci / -Co
9.
Dividends, changing over time: FROM {t=0} TO { INF } Dividend_t OVER { (1+r) } ^t
10.
Dividend remains constant:
Div / r
11.
Dividend growing:
Div / (r-g)
12.
Bonds:
Pvbond = PVinterest + PVprincipal Pvinterest = [P*y/r] * [1 - 1/(1+r)n] Pvprincipal = P / (1+r)n
13.
Zero Coupon Bond Formula: P = cash payment upon maturity ya = discount rate n = term of years
Ya = (P / Q)1/n - 1
14.
Beta of portfolio, p
i * fi
15.
Expected Return:
probi * returni
16.
Variance =
17.
Covariance, Cov (AB) =
18.
Correlation, b/t -1 and +1:
19.
CAPM:
20.
Put-Call Parity Theorem:
2
(returni - ER)2 * probi
:
AB
probi * (returnia - ERa) * (returnib - ERb)
= Covab / (
a
*
)
b
ER port =Rf + port * [ERm - Rf]
Ct - Pt = Stock - PV(xstrike)
21.
Value of call:
call *P - PV(x)* ’call
22.
Value of put:
-put *P + PV(x)* ’put
23.
put / call delta:
put = 1 - call
Capital structure 24.
MMI
capital structure is irrelevant Vlev = Vun
25.
Leverage affects rate of return: Rs = return on stock Rb = return on bonds Ro = return on un-leveraged firm B/S = ratio of bond $ to stock $
26.
Weighted average cost of capital:
Rwacc = Fb * Rb + Fs * Rs
27.
Formula for asset (leveraged): [WEIGHTED AVERAGE]
B/(B+S) * bond + S/(B+S) stock
Rs = Ro + B/S (Ro - Rb)
stock = asset + B/S (asset - bond)
Y SUB a = (1 + {Y SUB nom}OVER n) Multiple Period formula for calculating SUP n - 1 annual interest rates Ynom = n * Yperiod 0.08 = 4 * 0.02 0.08 = 2 * 0.04 C OVER r 2.
Perpetuity:
3.
Growing Perpetuity:
4.
Annuity (g = 0):
5.
C OVER {r - g } (1- {(1 + Growing Annuity, which g) } ^n OVER { (1 + r) } contains all the other formulas: ^n)
C OVER {r - g }
6.
If cash flows, interest rate changes over time then:
C OVER r (1- 1 OVER { (1 + r) } ^n)
FROM {t=0} TO {n} ER_t over {(1+r)^t}
7.
Internal Rate of Return
IRR or y = r = (P / Q)1/t - 1
8.
Rate of return, 2-period world: Undiscounted sum of cash flows amount invested
r = Co + Ci / -Co
9.
Dividends, changing over time: FROM {t=0} TO { INF } Dividend_t OVER { (1+r) } ^t
10.
Dividend remains constant:
Div / r
11.
Dividend growing:
Div / (r-g)
12.
Bonds:
Pvbond = PVinterest + PVprincipal Pvinterest = [P*y/r] * [1 - 1/(1+r)n] Pvprincipal = P / (1+r)n
13.
Zero Coupon Bond Formula: P = cash payment upon maturity ya = discount rate n = term of years
Ya = (P / Q)1/n - 1
14.
Beta of portfolio, p
i * fi
15.
Expected Return:
probi * returni
16.
Variance =
17.
Covariance, Cov (AB) =
18.
Correlation, b/t -1 and +1:
19.
CAPM:
20.
Put-Call Parity Theorem:
2
(returni - ER)2 * probi
:
AB
probi * (returnia - ERa) * (returnib - ERb)
= Covab / (
a
*
)
b
ER port =Rf + port * [ERm - Rf]
Ct - Pt = Stock - PV(xstrike)
21.
Value of call:
call *P - PV(x)* ’call
22.
Value of put:
-put *P + PV(x)* ’put
23.
put / call delta:
put = 1 - call
Capital structure 24.
MMI
capital structure is irrelevant Vlev = Vun
25.
Leverage affects rate of return: Rs = return on stock Rb = return on bonds Ro = return on un-leveraged firm B/S = ratio of bond $ to stock $
26.
Weighted average cost of capital:
Rwacc = Fb * Rb + Fs * Rs
27.
Formula for asset (leveraged): [WEIGHTED AVERAGE]
B/(B+S) * bond + S/(B+S) stock
Rs = Ro + B/S (Ro - Rb)
stock = asset + B/S (asset - bond)
